US-Iran Tensions: Updated Political and Oil Supply Scenarios

The US continues to pour assets into the Mideast Gulf in what is reportedly the largest regional military buildup since the Iraq invasion in 2003. Updated Energy Intelligence scenarios sees some form of US and/or Israeli action against Iran as likely, but considerable uncertainty persists around its likely scope, Iran’s ability to withstand it or what Washington’s end goals for an operation would be. Our current base case sees a loss of approximately 350,000 b/d in Iranian exports, assuming diplomacy fails, but that any resulting fighting remains relatively contained. We see crude prices rising to over $115/bbl, in a worst-case scenario, while the oil price downside from a deal is lower, with crude settling closer to a $63/bbl if the current geopolitical premium were removed.