This article explains why the fear of an oil price spike is the main obstacle to real de‑escalation, and what the market should understand about the second wave of pressure on Tehran.
Markets breathed a sigh of relief when the US did not strike Iran’s energy infrastructure and oil pulled back. But this very relief is a worrying signal: the same fears about oil prices once led Western policy into a four‑year Ukrainian quagmire. Iran risks repeating this scenario.
The High Cost of Half-Measures in Ukraine
The biggest mistake of the West after Russia’s invasion of Ukraine was the fear that tough measures, such as a blockade of Russian oil exports, would trigger a global price spike and a recession. This fear gave birth to the G7 price cap, an attempt to sit on two chairs at once: keep Russian oil on the market but limit Moscow’s revenues with an administrative price.
The idea was reasonable in theory but failed in practice: the complexity of enforcement allowed Western shipowners, primarily Greek ones, to sell dozens of tankers to Putin for the “shadow fleet.” This gave Russia the ability to bypass the cap and earn enough money to finance the war without time limits. The result: more than four years of prolonged conflict instead of a short one, because a decisive blockade in 2022 could have collapsed the Russian economy and stopped the invasion.
Iran: The Same Trap, Six Weeks of Delay
The dynamics around Iran repeat the Ukrainian logic. The US did not impose a blockade during the first six weeks of the war precisely because commodity‑market analysts were widely warning about the risk of oil at 200 dollars. As a result, during all this time Iran freely continued exporting its own oil while simultaneously fully blocking Western vessels. President Trump’s achievement is that he ignored these alarmists and on April 13 launched his own blockade.
How the Blockade Worked? Three Channels of Pressure
The first wave of the blockade hit Iran through three channels at once.
- Panic and capital flight – the effect occurs instantly: the rial weakened sharply immediately after the blockade began in April.
- Storage shortages – already after several weeks, Iran had nowhere to put its oil, forcing empty tankers into the Gulf for floating storage.
- A drop in export revenues – roughly after a month, the blow hit Iran’s ability to pay for imports: by May its purchases in Asian countries had fallen noticeably more than those of other Persian Gulf states.
Chart 1. Reaction of the Iranian rial to the start of the blockade (April)
Chart 2. Thailand’s imports from Iran as an indicator of trade collapse
The first wave of the blockade worked: it noticeably hit the Iranian economy while almost not driving up global oil prices.
The Dangerous Pause After the Blockade Was Lifted
As part of the peace process, the blockade was lifted on June 18. Iranian tankers are once again freely leaving the Persian Gulf, bringing the regime resources to continue the conflict, while also freeing up space in storage facilities that had been overflowing during the months of blockade.
Chart 3. Brent spot price and futures after June 18
Both lines (spot and near‑term futures) are declining as markets ease on the US decision not to strike Iran’s energy infrastructure. The key argument: the alarmists’ fear did not materialize, which means there is room for tougher measures.
What Markets Are Celebrating Is Actually Bad News
The market reaction to falling oil prices as a sign of relief actually signals that the world is moving toward the same prolonged quagmire as in the case of Ukraine. The only way to avoid this is to make the regime in Tehran fear for its own survival again by restoring the blockade as quickly as possible, and in a strengthened form.
Why a Second, Tougher Wave Is Needed
Iranian “hawks” continue provoking incidents in the Strait of Hormuz, believing they can extract additional concessions from the US. This shows that the peace deal in its current form does not work. The second wave of the blockade cannot simply repeat the first – it must start more forcefully so that Tehran receives an unambiguous signal immediately.
- Do not allow empty Iranian tankers to enter the Gulf. Close the loophole of floating storage that Iran used the first time.
- Precisely disable or destroy oil storage facilities. A few demonstrative cases are enough to frighten the regime.
- Disable the loading terminals of the port of Jask on the coast of the Gulf of Oman – Iran’s second export hub after Kharg Island (about 90% of exports).
All three steps are escalation: markets will not like it, and oil prices will likely rise. But this is the only way to avoid another endless quagmire following the Ukrainian pattern.
A Fork in the Road: Escalation Now or a Quagmire Later
The key takeaway of the digest: the choice is not between war and a peace deal. Practice shows that the peace deal in its current form is not an option as long as Iranian “hawks” keep sabotaging it again and again in the Strait of Hormuz. The real choice is between short‑term economic escalation (a tougher blockade) and a medium‑term quagmire without resolving the conflict. The latter is hardly the kind of legacy that would suit President Trump.
What this means for the market
The spread between Brent spot and futures prices, the geopolitical risk premium in the Strait of Hormuz, and the dynamics of the rial – these are the key indicators to monitor in the coming weeks: any of them may reverse sharply if the blockade is reinstated.