While we haven’t seen things escalate further recently, it is best to be reminded that US-Iran tensions are still very much simmering beneath the surface. And the IRGC is offering a reminder of that as they claim that four vessels were hit and caught fire in the northern Gulf, while three other vessels were reportedly struck by mines west of the Strait of Hormuz overnight.

Besides that, Tehran is also warning that its response could extend to US bases across the region if Washington continues to encourage vessels to cross the Strait of Hormuz.

The major concern here remains the fact that shipping through one of the world’s most important energy routes remains vulnerable to further disruption. And even if oil supplies continue to flow, the threat alone is enough to keep shipping costs elevated and place a geopolitical premium into oil prices. So, that is hardly the kind of environment which will allow for oil markets to settle down comfortably.

With that in mind, the situation also leaves broader market sentiment walking on eggshells.

Sure, investors have not paid all too much attention to US-Iran developments as of late amid a lack of meaningful progress or escalation. However, the continued tensions and just the risk of things blowing up further could quickly bring oil prices, inflation worries, and risk aversion back into focus. Just the very fact that the threat continues to hang over the shoulders of broader markets is enough to make things difficult for investors in the bigger picture.

So until there are clearer signs of de-escalation, I wouldn’t be too quick to dismiss the geopolitical risks lurking in the background. And we might very well have to wait until the US midterm elections are over and done with before we find out what Trump wants to do next in the conflict here.

This article was written by Justin Low at investinglive.com.