IRGC claims Hormuz attacks, keeping oil markets on edge

Though there has been no major new escalation recently, the IRGC is issuing a reminder that US-Iran tensions remain high. The IRGC said four vessels in the northern Gulf were struck and caught fire, while three other ships were reportedly struck by mines west of the Strait of Hormuz overnight.

Tehran has also warned that if Washington keeps encouraging ships to traverse the Strait of Hormuz, Iran's response could expand to include US bases across the region.

The core worry is that shipments through this critical energy corridor are still at risk of further disruption. Despite oil cargoes still moving, the persistent threat is sufficient to keep transport costs high and to maintain a geopolitical risk premium in crude prices. This makes it difficult for oil markets to find a stable footing.

Consequently, the broader market atmosphere remains extremely cautious.

Admittedly, investors have lately paid less attention to US-Iran friction given the absence of clear progress or a fresh flare-up. Still, the enduring tensions and sheer possibility of an escalation mean that oil prices, inflation concerns, and a turn away from risk could swiftly return to the fore. The mere idea that this threat persists in the background complicates the investment landscape considerably.

Until clearer de-escalation emerges, the geopolitical risks should not be dismissed. A wait until after the US midterms might be necessary to see what Trump wants to do next in the standoff.