Iran has substantial experience in navigating sanctions and has already put in place robust strategies to circumvent them. With the support of major powers like China and Russia, as well as the rise of BRICS, Iran has built a strong network to evade such restrictions. The underlying motivation for these sanctions appears to be appeasing key US allies, such as Israel, and addressing domestic political considerations. Looking ahead, the US seems unwilling to deploy its military or diplomatic influence in a meaningful or escalatory way. This leaves the field open for other players to assert themselves and carve out larger roles in the region. We’re likely to see an increase in such jockeying for power, especially as Trump has effectively ruled out military intervention, leaving economic sanctions as his primary tool, which have already been maxed out.
How does the oil market today view geopolitical uncertainty?
Today’s oil markets are far more resilient to regional shocks. They have been less impacted by geopolitical tensions due to changes in global oil supply, including increased US shale production, South American output, and ongoing Russian oil exports, reducing dependence on Middle Eastern oil. On the Israel-Palestine issue, while some feared Trump’s stance would escalate conflict, he probably deserves credit for pressuring the peace treaty between Gaza and Israel, which was finalized under Biden but had significant groundwork laid during Trump’s administration. In the short term, Trump is seen as helping reduce violence.
What are the chances of lasting peace in the Middle East?
The key factor is Trump’s approach. While he has fostered a reputation as a peace promoter, he is unlikely to support any escalation of conflict involving Israel. He has the ability to pressure Israel when needed but also rewards them in other ways. Unlike Biden, who gave Israel a free hand, Trump takes a firmer stance on preventing violence escalation, particularly early in his administration when he aimed to broker peace. Israel, for its part, has reasons to avoid further conflict, such as stabilizing its economy and reducing the human and material costs of ongoing warfare. Despite these factors, the situation remains unpredictable, especially with the involvement of the Houthis. Their actions, particularly around the Bab-el-Mandeb strait, could significantly impact the region’s stability, making the overall trajectory of conflict uncertain.