Analysis by Energy Workforce President Tim Tarpley
This week marks a month into the war between Iran and the United States/Israel, and we continue to see conflicting signs as to whether the war will escalate or wind down. Over the weekend, President Trump issued a 2-day ultimatum to the Iranians to reopen the Strait of Hormuz; however, the deadline was later extended to 5 days after the President stated that positive discussions had taken place. Currently, most crossings through the strait have come to a halt; however, a small number of boats are still making it through, some of which may be paying a $2 million crossing fee to the Iranians.
On Friday, the same day that the new 5-day deadline to open the Strait will expire, 2,200 marines are expected to arrive in the region on the USS Tripoli under the control of the US Central Command. Additionally, a second marine unit of around 2,500 personnel is expected to depart from its base in California and arrive in the Middle East in mid-April. It is not known if these troops could be used to occupy Iranian territory, such as Kharg Island, in an attempt to reopen the strait or capture nuclear materials. On the Iranian side, so far, they have demanded compensation for the damage caused by US strikes as well as a firm guarantee that a ceasefire will be permanent. Iran is expected to continue to use the closing of the Strait as leverage, as well as threats to attack Middle East energy infrastructure. Iran indicated on Sunday that it would allow safe passage for some ships but not for those associated with its “enemies”. It is unclear exactly what this means, but it appears that ships associated with Pakistan, India, Russia, and China may indeed get through.
What does all this mean for us? Well, certainly, the longer this continues, the more unlikely it becomes that the timeline for a resumption of “normal” operations in the Middle East will be. Brent crude bounced back above $100 this week as optimism for a de-escalation of the conflict appeared to fade. There was a sharp sell-off on Monday after the President’s comments indicating a de-escalation; however, these comments appeared premature as time went on. Barring a sharp turn this week, it appears reasonable to assume that hostilities will continue for at least another month and that oil prices will hover around their current levels. The market appears to have reached a settled level that is likely to remain unless a dramatic escalation occurs. Saudi Arabia and a few other Gulf States have appeared to be more likely to engage in recent days. So this is something to watch closely. This could signal a wider war that may last even longer.
Tim Tarpley, Energy Workforce President, analyzes federal policy for the Energy Workforce & Technology Council. Click here to subscribe to the Energy Workforce newsletter, which highlights sector-specific issues, best practices, activities and more.
