El-Erian Says Oil Could Climb Above $90 If US-Iran Conflict Escalates As Trump Declares Ceasefire 'Over'

• Iran and the U.S. renewed hostilities this week after signing a broader ceasefire agreement in mid-June.
• The U.S. has revoked a sanctions waiver that had allowed limited Iranian oil sales.
• Crude prices had fallen to pre-war levels earlier this month.

Mohamed El-Erian, Chief Economic Advisor at Allianz, warned on Wednesday that crude oil prices could climb back above $90 per barrel if the U.S.-Iran skirmish this week escalates into a broader conflict.

Oil prices jumped on Wednesday after tensions between the U.S. and Iran escalated again in the Strait of Hormuz. Spot Brent oil prices were up nearly 6% to $78.4 per barrel, while Brent oil futures for September 2026 deliveries climbed 5.4% to $78.2 per barrel.

The West Texas Intermediate Crude futures for August 2026 deliveries rose 5.4% to $74.25 per barrel.

Markets Are Still Betting On A Contained Conflict 

In a post on X, El-Erian said that the markets largely expect the latest U.S.-Iran flare-up to remain contained, and while skirmishes may occur periodically, it is unlikely to evolve into a broader conflict.

“Should this view be challenged in a significant way, however, oil prices could quickly jump into the $80s or $90s,” El-Erian added.

Earlier this month, crude oil prices dropped to their lowest levels since the U.S.-Israeli strikes on Iran on Feb. 28, 2026. Oil had retraced nearly all of its war-driven gains as traders bet the conflict would remain contained and supply disruptions would prove temporary. 

Trump Says Iran Truce Is ‘Over’

On Wednesday, U.S. President Donald Trump said the tentative ceasefire with Iran has ended, raising the risk of renewed fighting between the two countries.

“For me, I think it’s over,” Trump said at the NATO summit in Turkey. “As far as I’m concerned it’s just a waste of time.”

The announcement came after Iran attacked three commercial ships in the Strait of Hormuz, prompting the U.S. to revoke a sanctions waiver that had allowed limited Iranian oil sales. U.S. forces also said they carried out a series of powerful strikes against Iran late Tuesday.

“It’s a big wake-up call for the markets because the expectation was that ​following the MOU, we were likely to start to see the flow of oil coming back into the markets. And we saw ​inflation expectations being dialed down," Aneeka Gupta, director of macroeconomic research at WisdomTree, told Reuters.

“The way we're looking at it now is what has changed materially is the (Iranian) oil waiver is gone. It has removed a very key incentive for Iranian compliance.”

The removal of the sanctions waiver effectively reduces expectations that additional Iranian barrels will return to global markets, tightening the supply outlook just as geopolitical risks intensify. 

Retail’s Take On Key ETFs

Key energy-related exchange-traded funds gained on Wednesday. The Energy Select Sector SPDR Fund (XLE) rose nearly 2%, while the United States Oil Fund (USO) gained more than 2% and the ProShares Ultra Bloomberg Crude Oil Fund (UCO) rose around 2.7%.

Retail sentiment surrounding USO and UCO on Stocktwits turned ‘bullish’ from ‘neutral’ while sentiment remained ‘bullish’ for XLE over the past 24 hours.

USO and UCO have added nearly 25% to their value since the war began in February.

Also read: Nasdaq, Dow Futures Crack After Trump Says Iran Ceasefire ‘Over’ – Why MU, SNDK, DJT, USO Are In Focus

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