U.S.-Iran Clashes Escalate Over Weekend, Test Market's 'No Full-Scale War' Consensus, Oil Prices May Rise to $80

According to Mohamed El-Erian, Allianz chief economist, weekend clashes between the United States and Iran have intensified, testing the market consensus that a full-scale military conflict will not occur. On July 12, El-Erian said on X that the recent escalation could shake existing market expectations.

If the market consensus holds, oil prices will rise but not spike sharply, with Brent crude potentially trading in the late $70s or early $80s per barrel. Should the consensus weaken, crude could initially surge to the mid-$80s, El-Erian noted, adding that the situation remains increasingly volatile.