Scott Bessent says markets have overestimated the prospect of renewed large-scale U.S. combat with Iran. But disrupted supply, uncertainty over sanctions and tight diesel availability continue to shape oil prices.
Brent crude closed at $94.39 a barrel and U.S. West Texas Intermediate finished at $87.06 on Aug. 21, after oil prices rose more than 5% for the week. The market’s focus extends beyond the prospect of military escalation to the supply disruptions and refined-product constraints already affecting trade.
Speaking to CNBC, Treasury Secretary Scott Bessent argued that traders had read the Trump administration’s threats toward Iran too broadly. He said a tougher economic-pressure campaign made a return to large-scale U.S. combat operations less likely.
Prices rose after hopes for an agreement faded
Crude prices had eased during the first two weeks of August as U.S. officials suggested an agreement with Tehran was near that could increase traffic through the Strait of Hormuz. Such an outcome would have eased concerns about the availability of Middle Eastern crude and refined products.
Prices began rising again after an agreement did not materialize and public rhetoric hardened, CNBC reported. For traders, the key question was whether there was a workable arrangement that could improve actual flows.
Iranian President Masoud Pezeshkian said Tehran wanted the war to end sooner rather than later. He described the June memorandum of understanding with the U.S. as a victory for Iran; the memorandum allowed Iran to determine how Hormuz would be administered through negotiations with Oman and other Gulf states.
Those statements offer grounds for cautious optimism, but an announced framework, a negotiated arrangement and reliably restored shipping conditions are different things.
Diesel supply is under particular strain
Helima Croft, RBC Capital Markets’ head of global commodity strategy, identified diesel as a particularly acute point of stress. She said global diesel markets were already tight because of Ukrainian attacks on Russian refineries and Middle East outages linked to the Hormuz disruption.
Diesel is used in freight transportation and agriculture. Constraints in its availability can affect the cost of moving goods and food.
Croft said diesel prices were at historic highs and that spare refining capacity for diesel was lacking. That leaves less cushion if another refinery goes offline, shipping delays worsen or disrupted product flows persist.
This does not guarantee a matching move at every local gas pump. Retail fuel prices also depend on taxes, distribution, seasonal blends, refinery margins and regional supply.
Traffic through Hormuz has continued, but supply remains constrained
Before the war, roughly 20 million barrels a day of oil and petroleum products moved through the Strait of Hormuz, according to figures cited by CNBC. The U.S. military said it had assisted tankers carrying more than 660 million barrels through Hormuz since early May.
That indicates traffic has continued, but continued passage is not the same as normal conditions. It also does not mean every disrupted barrel has been replaced.
Croft estimated that the conflict was still removing about 8 million barrels a day from the market even though the strait was not closed. Tankers can transit Hormuz while the broader system remains materially constrained.
Chokepoint disruptions can be difficult to offset because rerouting cargoes, finding different crude grades, securing shipping and insurance, and adjusting refinery operations take time. A route need not be fully blocked to make supply less predictable and more expensive.
Sanctions are part of the market calculation
Bessent said the U.S. would impose what he called the “toughest sanctions in history” against Iran. The administration’s position is that economic pressure can serve as an alternative to broader combat and should be treated as a de-escalatory signal.
But sanctions enforcement, trade relationships and the response of countries that deal with Iran can also influence how markets assess available supply. Croft noted that Iran is already among the world’s most sanctioned countries.
She said it remained unclear whether Washington would target China and Russia, which have relationships with Iran, and whether additional restrictions would change Iranian behavior. If stronger sanctions sharply curb commerce, they could tighten supply even if they reduce the odds of direct military action. If enforcement is uneven or partners find ways around restrictions, the effect could be more limited while political uncertainty persists.
What markets may need to see
Bessent may be right that investors have assigned too much weight to a return to broad combat. The supply disruption already underway may nevertheless be enough to support elevated prices.
A durable decline would likely require more than assurances about U.S. combat plans. Markets would be looking for credible evidence that shipments through Hormuz can return closer to normal, supply losses are shrinking and diesel constraints are easing.
Clearer details on sanctions enforcement would matter as well, including how other major trading partners and Iran respond. For now, the oil story is not only about a daily crude-price quote; it is also about what remains physically constrained in the system.
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