The probability of no-deal scenarios between the United States and Iran has increased to 55%, while a narrow agreement remains the base-case scenario with a 40% probability, according to Rystad Energy's latest market update.
The Norway-based independent energy research and intelligence company said no-deal outcomes could sustain a geopolitical risk premium of $10-$20 per barrel in oil prices, while a narrow agreement would leave markets with a $5-$10 per barrel premium.
Rystad assigned a 35% probability to a stalemate scenario and 20% to renewed fighting between Washington and Tehran.
The consultancy said the probability-weighted geopolitical risk premium in oil prices is now significantly higher than it was in mid-June, when the 60-day memorandum of understanding (MoU) between the two sides appeared to be holding.
Under a stalemate scenario, Rystad expects oil prices to retain a geopolitical premium of $10-$15 per barrel, while renewed fighting could push the premium to $15-$20 per barrel.
A narrow agreement remains the company's base-case scenario, with a 40% probability. Under this outcome, Rystad expects an interim agreement around Aug. 16 that would allow traffic through the Strait of Hormuz to recover to around 10 million barrels per day (bpd) by mid-August and approximately 14 million bpd by October.
A comprehensive resolution, which Rystad assigned only a 5% probability, would largely eliminate geopolitical risk pricing, leaving a premium of just $0-$2 per barrel.
- Aug. 16 becomes key date for oil markets
Rystad revised its scenario outlook following renewed security tensions around the Strait of Hormuz, where maritime attacks have resumed and the US has reinstated its naval blockade on Iranian ports.
Brent crude prices have risen above $85 per barrel from around $72 at the beginning of the month amid growing supply concerns.
"The narrow deal is still our base case, but it has become a considerably less comfortable one," Jorge Leon, senior vice president and head of geopolitical analysis at Rystad Energy, said.
Leon said both sides retain strong economic incentives to avoid a complete breakdown in negotiations. Washington wants lower oil prices and a diplomatic outcome ahead of the November midterm elections, while Tehran has a substantial economic package on the table, including access to frozen assets and export waivers, that it does not want to walk away from permanently.
However, he said the most difficult issues remain unresolved, namely nuclear limits and control over commercial passage through the Strait of Hormuz.
"After Aug. 16, the question becomes whether the shipping market can adapt to a continuing threat rather than whether diplomacy can resolve one," Leon said.
The framework Rystad uses to assess these scenarios pivots around Aug. 16, when the 60-day MoU window expires.
Before then, the consultancy expects markets to focus on the intensity of military and maritime attacks, enforcement of the US naval blockade, Iranian oil exports and the pace of recovery in shipping through the Strait of Hormuz. After Aug. 16, attention will shift to whether any political arrangement holds and how the shipping market adapts to a continuing threat environment.
By Firdevs Yuksel
Anadolu Agency
energy@aa.com.tr
