During the Asian and European trading sessions on Wednesday, international oil prices experienced a slight pullback. However, global risk appetite remains tilted towards optimism. There is even a current phenomenon of oil prices and equity assets rising in tandem, while precious metals continue to see situations where negative news is treated as a buying opportunity.
The U.S.-Iran ceasefire agreement remains fragile on paper, yet neither side appears willing to break it in practice. What lies behind the U.S. strategy of encirclement without direct confrontation, maintaining a tense balance?
Encirclement and Pressure: From Economic Blockade to Physical Containment Currently, the strategy of the United States and its allies continues to be one of maintaining "maximum pressure" to force Iran into compromise. Following the United Kingdom's formal announcement to deploy drones, fighter jets, and warships for multinational escort missions in the Strait of Hormuz, the U.S. is no longer satisfied with sanctions at the financial level but has militarily completed a physical encirclement of Iran's energy lifeline. Recent frequent statements by the U.S. President not only claim that the current blockade "has achieved the intended effect" but also deliver a more forceful message: "If Iran does not make the right choice, we will resolve this matter completely." This posture of "using force to promote talks" reflects an aggressive mindset from the U.S. side after gaining an advantage in leverage, where the "stick" in negotiations far outweighs the "carrot."
Media Coordination and Non-Physical Pressure Despite Pakistan's mediation efforts, the structural contradictions in the negotiations remain significant. Iran insists that the U.S. compensate for years of war losses caused by sanctions, a demand viewed by Washington as a "political provocation." For the U.S. President, any form of "official compensation" would be tantamount to admitting policy failure, an absolute political taboo within the Republican Party. A prominent Republican figure has publicly questioned Pakistan's neutrality. Such dissenting voices from U.S. domestic hawks not only constrain the President's diplomatic maneuverability but also foster significant Iranian skepticism about U.S. sincerity in negotiations, preventing both sides from returning to the table. However, the U.S. President reiterated support for Pakistan's role as a mediator between Iran and the U.S., praising the Pakistani Prime Minister and the Army Chief of Staff for their efforts in facilitating the fragile ceasefire agreement that formally took effect last month.
Restructuring the Energy Card: The U.S. Oil Market's "Explosive" Countermove A core rationale behind the U.S. President's current confidence is energy autonomy. The President recently reasserted that inflation is "transitory." He reiterated that U.S. oil production is poised for "explosive growth," a move aimed not only at curbing domestic oil prices but also serving as a strategic deterrent against Iran. Concurrently, there is a linkage with Russia policy. Notably, the U.S. President hinted at a potential easing of the Russian oil exemption policy. Through flexible handling of restrictions on Russian oil exports, global oil supply is expected to increase substantially. Should global oil prices decline due to increased supply from the U.S. and Russia, Iran's pathway to generating foreign exchange through premium-priced oil exports on the black market would be cut off. The strategy aims to devalue Iran's oil leverage by "flooding the market."
Inflation Considerations and the Subtle Art of Maintaining the Status Quo Although inflation poses significant pressure on the global economy, countries like the U.S. are tacitly observing developments. It is important to note that major economies like the U.S. and Japan currently carry high levels of national debt, where annual interest growth cannot outpace GDP growth. If the situation deteriorates to the point where local currency credibility is affected, leading to capital flight, the consequences would be far more severe than rising inflation. Therefore, one of the most beneficial ways to manage government debt is to tacitly allow currency purchasing power depreciation and price increases. This effectively reduces government debt pressure indirectly. Since the debt stock is rigid, but nominal GDP can be boosted through price increases, the debt-to-GDP ratio ultimately declines. Furthermore, as the U.S. dollar is linked to oil, periods of rising inflation allow the U.S. to issue debt and expand credit without causing significant currency depreciation. Thus, the U.S. essentially replaces previously valuable dollars with less valuable ones.
Future Evolution: How to Rename "Compensation"? Regarding Iran's five preconditions, particularly the most contentious "war loss compensation," future developments may seek a soft landing through "interest transfer." To provide both sides with a face-saving exit, the U.S. and Iran might, with Pakistan's mediation, agree on an implicit "compensation package": Phased Unfreezing of Restricted Funds: The U.S. might permit the gradual release of tens of billions of dollars in Iranian assets frozen overseas under the guise of a "humanitarian fund." This would nominally be a "return of assets," not "official compensation," preserving U.S. prestige while alleviating Iran's cash flow crisis. A "Tacit Understanding" on Oil Exports: Both sides could reach an agreement to grant specific countries more oil import exemptions without lifting all sanctions. This de facto liberalization of oil exports would become the "economic dividend" Iran actually receives. Such actions would transform compensation into technical access for repairing Iranian energy infrastructure or enhancing civil aviation safety, ultimately achieving the effect of masking political concessions with economic cooperation.
Summary and Technical Analysis: The current U.S.-Iran standoff is at a stage where pressure exists on paper, but trading presents opportunities. The U.S. seeks to make Iran uncomfortable to gain leverage at the negotiating table, while turning a blind eye to inflation, thereby transferring part of its debt burden globally. During this process of debt dilution, corporate book revenues increase, leading global equity assets to continue rising even in a high-interest-rate environment, effectively subsidizing equity holders at the expense of creditors. Following this logic, rising oil prices are driven by both the reality of Strait of Hormuz tensions and U.S. debt management strategies. As markets become accustomed to high oil prices and inflation, and with corporate pricing windows opening, an asset feast benefiting the wealthy emerges. Regarding midterm elections, politicians can largely offset the negative electoral impact of inflation by distributing benefits to the public and stirring up enthusiasm.
On the technical front, Brent crude broke through the key Fibonacci 0.768 level at $106.43 and is currently in a pullback phase. Previous analyses have repeatedly suggested that rising oil prices align with the interests of various parties and that oil prices are likely to continue elevating the valuation center. Furthermore, with improving risk appetite, there may even be a phenomenon where oil prices and interest-rate-sensitive assets like gold rise together.
As of the latest update, Brent crude futures are trading at $106.92 per barrel.