The Iran war is likely to continue through the US congressional midterm elections in November and potentially beyond, analysts have warned, as peace talks repeatedly falter and both sides remain unwilling to make concessions.
Iranian officials are divided between public-facing politicians and the increasingly powerful Islamic Revolutionary Guard Corps (IRGC), while the government seeks to preserve leverage and inflict political damage on President Donald Trump during the election cycle.
With negotiations at an impasse and more oil moving through the Strait of Hormuz under US escort, Iran is losing influence and faces a choice between maintaining the current standoff and intensifying its attacks.
Matt Reed, president of geopolitical and energy consultancy Foreign Reports, said the conflict had begun to resemble the film Groundhog Day, with repeated negotiations, breakdowns and limited escalations.
“That also might mean we’re being lulled into a false sense of security, and the situation could still deteriorate. I think this is a very dangerous moment,” Mr Reed said.
He added that Iran’s economy was deteriorating and its oil exports had collapsed, while increasing volumes were passing through the strait. “Over the next few weeks, the Iranians might be tempted to lash out again,” he said.
Mr Reed said Iran could seek to “humiliate” Mr Trump if the US president refused to accept its demands. He also suggested Tehran was more likely to escalate before the election, while the Trump administration would prefer to delay any worsening of the conflict.
Energy markets are already facing seasonal record highs for petrol prices and all-time highs for diesel costs. A significant military escalation would add further pressure, with analysts warning of higher fuel prices, increased government spending, inflation and bond yields.
Oil forecaster Dan Pickering, founder of Pickering Energy Partners, described the midterms as “a line of demarcation”, although he said it was unclear whether a major development would come before or after the vote.
Iran may calculate that a Democratic victory in Congress would put pressure on Mr Trump to offer more favourable peace terms. But a period of restraint by Washington until November could also reopen military options after the election.
The long road to an Iran peace deal
The conflict, now entering its eighth month, shows little sign of reaching a settlement. Iran is demanding control of the Strait of Hormuz and the ability to charge fees for passage, while the US is insisting on nuclear concessions in advance.
Marshall Adkins, head of energy at Raymond James, said he was unsure whether an agreement could be reached within six months. “Getting to some kind of agreement that you can hold the IRGC to is going to be extremely difficult,” he said.
US military escorts have helped increase the flow of oil from the Middle East to almost 13 million barrels a day, although that remains below the 19 million barrels a day recorded in February. Iranian shipments are being blockaded.
The higher export volumes have been largely offset by China increasing its oil imports again and the US reducing releases from its Strategic Petroleum Reserve, which is already at a 44-year low. The Trump administration approved the release of a further 40 million barrels on September 29, a move that would reduce the reserve to emergency levels once completed.
Gulf states are paying substantially more for tankers and maritime insurance, while the cost of chartering an oil tanker has risen from about 50,000 dollars a day to 1 million dollars.
“We’re getting oil out of the strait by running these convoys, but how long are we going to do that?” Mr Adkins said. “Iran still has the ability to blow up a lot of stuff coming through there. Let’s not forget, Iran could shut all this stuff down tomorrow.”
