Iran's Secret Plan to Escalate War Sparks Muted Oil Market Reaction

The Wall Street Journal published a report alleging that hardline elements in Iran's leadership have been secretly planning to escalate the war, despite the recent ceasefire framework signed with the US. According to Arab and Iranian sources, these elements gave greater authority to the Islamic Revolutionary Guard Corps and appointed veteran commanders from the Iran-Iraq War to senior posts. This move is seen as a preparation for future conflict.

As a result of this escalation plan, the Strait of Hormuz has effectively stopped moving cargo, with only five ships passing through on Saturday compared to 31 the previous weekend. Shipping has decreased by 90% since the war began in February 2026.

The oil market reaction is muted, however, with Brent crude futures trading at $88.45 per barrel and WTI at $81.79. This is seen as a stalemate, with limited potential for gains in the near-term. The three major oil companies, Exxon Mobil, Chevron, and Occidental Petroleum, have all seen significant year-to-date gains, but their valuations are still a concern.

Tankers such as Frontline and DHT Holdings have benefited directly from rerouting and higher freight rates, posting larger year-to-date gains than the majors. However, insurers are collecting war-risk premiums on tanker hull value, which rose from 0.25% to 3-10% of hull value.

HSBC's Parash Jain advised investors to treat 'chaos as the norm' and watch Kpler's Strait transit count over the next two weeks for any signs of resumed negotiation between Qatar and Pakistan.