Donald Trump has two options: launch a preventive military strike on Iran or carry out a full-scale invasion aimed at regime change. Prediction markets think the second option is more likely. How could this play out? Let’s explore this and make a trading plan for Brent.
The article covers the following subjects:
Major Takeaways
- The US is prepared to use military force against Iran.
- Escalation of the conflict has pushed Brent to a six-month high.
- A closure of the Strait of Hormuz would sharply increase oil prices.
- A sustained move below $71.5 would favor short positions.
Weekly Fundamental Forecast for Oil
Should markets react to every twist in the story when the risk, though extreme, remains unlikely? Over the past month, Brent has swung sharply in response to news about a potential US-Iran nuclear deal. Only after the White House signaled readiness to use force and boosted the US military presence in the Middle East to levels not seen since the 2003 Iraq invasion did oil surge to six-month highs.
Brent’s Reaction to Developments Around Iran
Source: Bloomberg.
Investor behavior is understandable. In a bearish oil market environment, geopolitical price spikes have historically been followed by sharp declines from local highs. This happened during previous Iran-related episodes, including last summer’s US strike on Tehran’s nuclear facilities using bunker-buster bombs.
Indeed, wars either end or are prevented through negotiations, and past episodes support this view. Without geopolitical risks, the oil market remains firmly under bearish pressure. According to the IEA, global oil inventories increased by 477 million barrels in 2025, or 1.3 million barrels per day. Demand remained solid, while the surplus stemmed from higher output in the US, Brazil, and OPEC+. This situation is unlikely to change dramatically in 2026. So, the Alliance is thinking about resuming the gradual increase in production after the pause. Additional barrels could enter the market.
However, this time the Iran story may unfold differently. Donald Trump appears determined to halt Tehran’s nuclear program, including through the use of force. Prediction markets such as Kalshi and Polymarket assign a 70% probability to a military invasion, supporting Brent prices.
Probability of a US Invasion of Iran and Oil Price Dynamics
Source: Bloomberg.
Markets are less concerned about Iran’s production of 3 million barrels per day and exports of 1.5 million barrels per day than about the risk of a disruption in the Strait of Hormuz. Around 20 million barrels per day pass through the strait, roughly one-fifth of global demand. About 40% of that volume is linked to Saudi Arabia. While Saudi Arabia has pipeline alternatives that could partially bypass the strait, much of the oil supply lacks alternative routes.
Donald Trump has issued an ultimatum to Tehran, giving it 10–15 days to meet US demands. Iran has signaled it will respond, but its options appear limited. Further geopolitical escalation could extend oil’s rally.
Weekly Trading Plan for Brent
In my view, a military conflict in the Middle East could drive Brent toward $80 per barrel and beyond. By contrast, a diplomatic resolution would open the door to selling the North Sea benchmark with targets at $67 and $64.5. Selling makes sense if prices fail to hold above $71.5.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of UKBRENT in real time mode
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