Wolfe Research sees oil prices holding steady amid US-Iran standoff

Investing.com -- Wolfe Research analysts said the current US-Iran economic pressure standoff has created a "no war, no peace" equilibrium that appears increasingly entrenched as the original 60-day memorandum of understanding deadline has passed.

The firm noted both countries are pursuing economic pressure strategies, with neither generating enough pressure to force capitulation. The US has committed to economic isolation tactics, which analysts said may be the only option available given diminished munition stockpiles that constrain kinetic escalation possibilities.

Oil prices are expected to remain in their current range as long as this equilibrium persists, according to the research note. The firm pointed to recent commentary about covert oil shipments that may explain the muted crude price action, though analysts said they lack direct visibility into these flows.

Wolfe analyst Stephanie Roth calculated that WTI would need to average $120 per barrel through year-end to offset stimulus from individual tax cuts in the OBBB legislation. The firm said much of this stimulus remains on household balance sheets as a buffer.

The 10-year Treasury yield reached fresh 19-month highs and the 30-year yield hit fresh 19-year highs Monday. Wolfe said these moves are concerning but not primarily driven by Iran-related factors, noting inflation breakevens have behaved fairly well and shorter yields have declined since the July Federal Open Market Committee meeting.

The firm identified three potential ways the current equilibrium could end: a lasting deal, developments that make economic pressure tactics more effective for either side, or a decision by one side to escalate kinetically. Wolfe said none of these possibilities appears to be an obvious base case on any particular timeline.

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