Despite the looming threat of a broader Middle East conflict, Biden administration actions have helped contain hostilities and stabilize oil prices.
In early August, energy markets feared that an Iranian attack on Israel could ignite a larger conflict in the Middle East, leading to a significant spike in oil prices. Six weeks later, markets appear unconcerned, and oil prices have fallen to their lowest levels in nearly two years.
While peace has not broken out in the region and the possibility of a surprise escalation remains, the Biden administration’s concerted efforts have helped keep tensions under control. This stabilization is proving advantageous for Vice President Kamala Harris as she looks to benefit from lower oil prices heading into the final weeks of the U.S. election campaign.
Since the Hamas terrorist group attacked Israel on October 7, killing nearly 1,200 Israeli citizens, the Middle East has been on high alert. Israel’s ongoing invasion of Gaza has heightened its conflict with Iran, which supports Hamas and other regional militant groups hostile to Israel, including Hezbollah in Lebanon.
In April, Israel killed an Iranian general in Syria, prompting a retaliatory strike from Iran, which launched hundreds of drones and missiles toward Israel. However, most of the attack was intercepted by Israeli, American, and allied forces, limiting its impact. After that, Iran indicated that its revenge for the general’s death was complete.
Yet, on July 31, an explosion killed Hamas’s top political leader while he was visiting Tehran. Iran blamed Israel and vowed revenge. Many analysts expected a more significant or effective attack on Israel than the one in April, which made Iran appear somewhat ineffective. This rising tension pushed oil prices from $72 to $80 per barrel in early August. However, more than 40 days have passed since the July 31 incident, and no retaliatory attack has materialized. As a result, oil traders have seemingly discounted the threat, with West Texas crude falling to around $68 per barrel, the lowest level since December. Wall Street analysts, including Citi, have even cut oil price forecasts, predicting that Brent crude, the global benchmark, could drop to $60 by next year.
Behind the scenes, the Biden administration has taken strategic action. Without much public fanfare, President Biden has signaled that another direct attack on Israel could prompt U.S. military action against Iran. The Pentagon has sent two carrier strike groups to the Middle East, a formidable show of force that Iran has likely noted.
“The United States has deployed considerable military assets in the region and has made it very clear to Iran that there would be repercussions from another direct attack like April,” Gregory Brew of the Eurasia Group said during a webcast on September 4. “They’re conscious of their conventional military inferiority against Israel and certainly against the United States.”
Still, a delayed retaliation does not mean it has been canceled. Iranian commanders continue to threaten the “bitterness of Tehran’s revenge.” On September 7, a senior British official warned that Iran likely still plans to attack Israel. Pentagon and White House officials have echoed this view. One possibility is that Iran is waiting to see if ceasefire talks between Israel and Hamas yield results before making its next move.
As the U.S. election draws near, the containment of violence in the Middle East and the drop in oil prices offer a political tailwind for Kamala Harris, who stands to benefit from the economic stability heading into the final stretch of her campaign.
By Orlando J. Gutiérrez.