U.S.-Iran talks are following a script markets have seen before. Oxford Economics director Ben May calls the dynamic “eerily similar” to Trump’s first-term trade war with China — a cycle of pressure, flare-ups, and partial de-escalation that kept oil and equity markets guessing from 2018 through 2019. Here’s what it means: deep distrust between Washington and Tehran makes bumps inevitable, just as tariffs and retaliatory duties defined the U.S.-China relationship until the Phase One deal in 2020.
Think of it like a negotiation where both sides keep an off-ramp open. Trump has called talks with Iran a “waste of time” while also insisting the conflict won’t return to all-out war. In his first term, he said China was “ripping off” the U.S. but maintained a deal was possible. The practical upshot is market volatility and difficulty pricing which scenario plays out. At writing, Brent crude sits at $77 a barrel — down from May’s high of $113 but elevated from February’s pre-war levels.
In plain terms, oil tankers are reluctant to transit the Strait of Hormuz, stalling supplies. The VIX volatility index is creeping higher but remains well below conflict-onset levels. Oxford Economics’ baseline sees $73 per barrel by end of Q3 and $70 by year-end, roughly in line with pre-war pricing — but only if both sides keep negotiation on the table. May notes the balance of risks skews slightly toward a more adverse scenario, though it’s too early to call a major sustained surge more likely than not.
The inflation impact hinges on whether the Strait reopens fully. May wrote it was always going to be hard to have strong conviction about the Hormuz path and oil prices in the baseline forecast, leaving risks weighted to the upside near-term. The latest developments probably increase the risk of sustained disruption scenarios but haven’t yet forced major wholesale adjustments to the baseline. Wall Street, on balance, is looking ahead — markets are up month-to-month despite the geopolitical bumps.
For ordinary readers, the analogy to 2018-2019 China trade talks offers a framework: expect more flare-ups, more de-escalation, and a market that prices in uncertainty rather than any single outcome. The cycle repeats until a durable agreement locks in — or until the off-ramps close. Reporting by Eleanor Pringle, originally on Fortune.com, July 9, 2026.
