Oil prices over $100 could affect war with Iran, leading to escalation before elections - analysis

The US and Israel know that the main hurdle to keeping the lid on the war with Iran is the price of oil, and it will keep rising if no solution can be found for Hormuz and the Houthis.

High oil prices are going to be an issue over the next few weeks if they continue to stay above $100 a barrel. That is a clear challenge for the United States and also potentially for Israel in terms of keeping a lid on a renewed conflict with Iran prior to the elections in both countries. 

It is no secret that the looming elections have shifted dynamics, expectations, and assessments of whether the conflict could restart.

The high oil prices come amid a decline in stock prices on Wall Street, amid concerns about AI companies and energy prices. That could tend to be a kind of triple threat affecting the United States, and thus also affecting Israel.

That is because the United States has been working hard to keep diesel and oil prices from skyrocketing. There has been a lot of messaging that the Strait of Hormuz is open and that other energy sources exist, but the question is whether the global market will accept those assertions.

Recent videos showing ships sinking in the Strait of Hormuz and all sorts of containers floating away as ships are in distress are certainly not something that will boost global optimism regarding supply chains, and it always remains a question whether enough ships are transporting energy supplies.

What will the Houthis do?

It also leads to questions about what the Houthis might do. The Houthis could try to threaten the Bab el-Mandeb Strait. They could also encourage other Iranian proxies, such as those in Iraq, to continue attacks on Saudi oil and gas energy infrastructure. 

A mysterious explosion in Iraq on Saturday appears to have struck an Iranian proxy group there. All this could continue to disrupt global trade. For example, when attacks hit pipelines or transit points in Saudi Arabia, repairs can take weeks. That creates disruption, and all those disruptions add up to the feeling in the global market that there is too much uncertainty.

This kind of uncertainty will affect the US. It already appears to be affecting policy regarding the Ukraine-Russia war, and this is the kind of thing that can lead to escalation in the Middle East or miscalculations in which something happens again with Iran.

Meanwhile, Iran continues to be blockaded, but it also tends to feel a bit confident about its next steps. As a result, we see potential for escalation within the next week or two. 

Iran also knows there are elections in Israel and the United States; therefore, Iran and its proxies may want to take advantage of this period.