Crude oil prices have embedded a persistent risk premium due to the ongoing Iran-US tension in the Strait of Hormuz and recent strikes on UAE energy infrastructure, and that premium is likely to remain firmly in place even as occasional shipping transits under US protection cause temporary pullbacks.
Oil is currently carrying a war premium from the Iran conflict. President Trump claims a deal is close, which could reopen the Strait of Hormuz and release a meaningful amount of supply, pushing crude prices lower. However, markets remain in watch-and-wait mode and are not fully pricing in peace, meaning a signed deal could trigger a sharp decline in oil.