Fresh doubts are emerging on Wall Street over the growing optimism that the United States and Iran are close to ending a conflict that has already rattled global energy markets, disrupted shipping flows, and revived fears of another inflation shock for the world economy.
While markets initially rallied after President Donald Trump said over the weekend that a deal with Iran had been “largely negotiated,” analysts at Piper Sandler warned clients that expectations of a quick reopening of the Strait of Hormuz may be dangerously premature. In a note to investors, the bank’s energy and macroeconomic teams argued that the vital shipping lane is likely to remain “largely closed for months,” a scenario they believe could send oil prices to fresh highs later this summer.
“We think the Strait of Hormuz remains largely closed for months yet, meaning shortages become more urgent and oil hits new highs this Summer,” a recent note from the investment bank’s energy and macro teams said.
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The warning comes as mixed signals continue to emerge from Washington and Tehran. U.S. military officials confirmed that American forces carried out what they described as “self-defense strikes” in southern Iran, targeting missile launch sites and vessels allegedly laying mines near the Strait of Hormuz. The operation underscored how fragile diplomatic efforts remain even as negotiations continue behind the scenes.
Trump had earlier struck a more optimistic tone, saying on Truth Social that an agreement with Iran had been substantially negotiated and that details would soon follow. But Iranian officials have simultaneously warned that maritime access through the strategically critical waterway “will have costs,” reinforcing concerns that Tehran still sees the strait as leverage in negotiations.
The contradictory messaging has left investors struggling to determine whether the region is moving toward de-escalation or a more entrenched economic confrontation.
The Strait of Hormuz remains one of the world’s most important energy chokepoints, historically handling roughly one-fifth of global seaborne oil shipments alongside major volumes of liquefied natural gas exports from Gulf producers. Countries across Asia, Europe, and the Middle East depend heavily on uninterrupted flows through the narrow passage.
Shipping data has already shown vessel traffic collapsing to near-zero levels after the conflict intensified, creating mounting concerns about supply shortages if disruptions persist into the second half of the year.
Piper Sandler said it has “very little confidence” that commercial traffic through the Strait will recover even to half of pre-war levels in the near term. The bank argued that Washington appears reluctant to escalate militarily because a wider confrontation could destabilize neighboring Gulf states and deepen global supply chain disruptions.
The firm also suggested Iran’s leadership sees little incentive to compromise quickly because elevated oil prices and shipping disruptions strengthen Tehran’s bargaining position. That assessment contrasts with the recent rebound in global equities, where investors have increasingly bet that diplomacy would ultimately prevail.
Oil prices themselves illustrate the market’s uncertainty. U.S. benchmark West Texas Intermediate crude surged toward $120 a barrel during the early phase of the conflict before retreating to around $94 as hopes for negotiations improved. Piper Sandler now believes another leg higher is increasingly likely if shipping disruptions persist.
Such a move would carry major implications far beyond the energy sector.
Higher crude prices are already feeding into gasoline and transport costs globally, complicating central bank efforts to contain inflation. In the United States, rising fuel prices have become a growing political concern ahead of the 2026 midterm elections, particularly after inflation had shown signs of easing earlier this year.
The Federal Reserve now faces a more difficult balancing act. Markets that previously expected multiple rate cuts in 2026 have sharply revised those assumptions as energy-driven inflation risks intensify. Bond markets have also become increasingly volatile as investors reassess the likelihood of prolonged higher interest rates.
The broader economic threat extends into manufacturing, aviation, logistics, and consumer spending. Europe and Asia remain particularly vulnerable because many economies rely heavily on Middle Eastern energy imports routed through Hormuz.
Analysts say even a full reopening of the waterway may not immediately normalize markets because insurers, shipping firms, and commodity traders are likely to continue pricing in elevated geopolitical risks for months.
The conflict has also revived debate over the vulnerability of global trade routes and the concentration of energy infrastructure in geopolitically unstable regions. Several governments are already accelerating discussions around strategic petroleum reserves, alternative shipping corridors, and long-term energy diversification plans.
For investors, the central question is no longer simply whether a diplomatic agreement can be reached, but whether any deal would be strong enough to restore confidence in one of the world’s most critical trade arteries.
At the moment, Piper Sandler appears unconvinced.