Oil prices have fallen sharply amid expectations that Democratic congressional victories could help end the U.S. conflict with Iran. However, analysts cited in the report warn that military tensions remain elevated and that renewed fighting could reverse recent declines in energy markets.
Crude fell more than 16% over five trading days after Vice President JD Vance linked Republican election losses to the war. Democrats plan to pursue a war powers resolution after taking control of Congress in January, although President Donald Trump could veto it.
Rapidan Energy estimates an 80% probability that fighting will resume as diplomacy stalls. Its president, Bob McNally, said renewed hostilities could push crude above $100 a barrel. Brent traded above $97 on Friday, while U.S. crude was around $90. McNally identified disagreement over Iran’s nuclear capabilities as a continuing source of escalation.
The report describes attacks on tankers near Oman, continued Houthi missile launches toward Saudi Arabia and an ongoing U.S. military buildup. It also cites reports of a disabled tanker and explosions in Iran that CNBC could not independently confirm. Trump said he would soon decide whether to launch additional attacks.
RBC Capital Markets strategist Helima Croft cautioned that market optimism contrasted with escalation risks in the Gulf. Former Biden energy adviser Amos Hochstein also warned that renewed conflict could raise gasoline, diesel and jet fuel prices.
Diplomatic contacts continue through Qatar. An unnamed Iranian official told Reuters that Tehran had submitted a nuclear proposal, while attaching conditions to further discussions. Trump also discussed regional tensions with Qatar’s emir.
Congressional funding decisions could eventually influence the administration’s options, Croft said. However, delayed budget negotiations would not immediately restrict military operations. The report presents a central uncertainty for oil markets: whether diplomatic and political pressure will reduce tensions before further attacks disrupt expectations of de-escalation.