Risk of Iran war escalation remains high despite Democratic election sweep

The U.S. and Iran are careening toward renewed war despite growing hopes this week that the Democrats’ decisive midterm election victory will bring the conflict to an end, analysts say.

Crude oil prices fell more than 16% over the last five trading days after U.S. Vice President JD Vance publicly blamed the Republicans’ stinging loss on the war. Vance’s remarks raised questions about whether the administration still has support to continue the conflict with Iran.

The Democrats plan to use their comfortable majorities in both chambers of Congress to pass a war powers resolution that demands President Donald Trump end the war. But tensions in the Middle East have not eased since the election, and the Democrats aren’t sworn in until January, the analysts say.

“Throughout the week, we were struck by the divergence between deepening escalation concerns in the Gulf and the headline-driven off-ramp optimism of market participants thousands of miles away,” Helima Croft, head of global commodity strategy at RBC Capital Markets, told investors in a note Friday.

More attacks

Late Saturday, U.S. Central Command said it disabled a St. Kitts-flagged ship after the tanker ignored multiple warnings and attempted to leave the region after visiting an Iranian port, according to media reports. Iran state media also reported on explosions on Qeshm Island in the Strait of Hormuz, as well as several blasts occurring in the port of Jask. CNBC couldn’t independently confirm the reports.

Several oil tankers have also come under attack near Oman since the election, killing one seafarer, according to maritime security agencies. Iran’s Houthi allies in Yemen continue to fire missiles at neighboring Saudi Arabia.

Meanwhile, the U.S. military buildup continues, with a third carrier strike group en route to the region. The consulting group Rapidan Energy sees an 80% chance that fighting will resume as diplomacy stalls.

Trump told reporters Thursday that he will make a decision soon on whether to attack Iran again.

“I would rather not destroy the rest of the country if possible but maybe I’ll have to,” Trump said in the Oval Office. “You’ll know soon enough.”

“We’re locked and loaded,” the president said. “If we have to do the rest of the Iran thing, we’re very much locked in.”

Price risk

Crude oil prices will vault above $100 a barrel again in response to renewed fighting, said Bob McNally, president of Rapidan and a former energy advisor to President George W. Bush. Brent crude, the international benchmark, traded above $97 on Friday, while U.S. crude was around $90.

“President Donald Trump is determined as a legacy item, almost at all costs, to prevent Iran from getting a nuclear weapon, having them give up their nuclear capabilities,” McNally told CNBC’s “Squawk Box Asia” on Friday.

“The Iranian regime, on the other hand, is not willing to do it,” the analyst said. The escalation dynamic remains in place so long as that core difference between the U.S. and Iran persists, he…