The outlook on Iran remains uncertain, but the most plausible trajectory is not open conflict. Instead, markets are watching a familiar pattern of diplomatic manoeuvring, with both Washington and Tehran obscuring their true intentions. There appears to be US interest in a deal, most likely centred on the nuclear file, that can be framed domestically as tougher than previous agreements, even if it looks similar in substance. In that scenario, Washington claims success, Iran concedes marginally without real loss, and military escalation is avoided. From an energy market perspective, this remains the most credible base case.
Diplomacy anchors expectations because it allows leaders to save face while avoiding the economic and geopolitical risks of military action. Even if force were used, it would likely be limited in scope and designed to avoid directly targeting energy infrastructure. More destabilising outcomes emerge only if escalation widens, particularly if additional regional actors become involved, raising the risk of miscalculation.
Across the GCC, there is a clear determination to stay out of the conflict and avoid becoming targets of retaliation. The UAE, Saudi Arabia, and Qatar have publicly signalled that they do not wish to facilitate attacks on Iran, prioritising the protection of oil exports and energy infrastructure. Neutrality also allows for defensive ambiguity, where actions such as airspace interception can be framed as protection rather than participation.
Sanctions remain the most credible pressure tool, but escalation carries risks. Iranian exports could be reduced and replaced by spare capacity elsewhere, but Iran cannot tolerate exports falling to zero. As pressure increases, so does the likelihood of retaliation, especially against shipping, where even limited disruption can inject risk into markets.