Oil prices have crashed about 20% from the late-October peak of $118 per barrel, weighed down by hopes of sustainable de-escalation in the Middle East and the Russia-Ukraine war.

For months, traders and hedge funds have often bet on a resolution of the conflicts, only to reactivate buying when talks fall apart.

As U.S.-mediated talks between Ukraine and Russia are underway, there are no signs of a breakthrough in either the conflict in Europe or the U.S.-Iran standoff, despite messaging via Qatar.

Oil prices have slipped as crude oil flows from the Strait of Hormuz and the entire Middle Eastern region have rebounded in recent weeks to nearly pre-war levels.

But Brent at about $94 a barrel on Thursday, after briefly slipping below $90 on Wednesday, could be very close to a floor under oil prices if the Middle East remains the gray area of ‘no deal but no escalation either’ for months.

As long as the stalemate persists, risks to shipping will remain elevated and insurance premiums will stay high, adding sharply to the cost of each barrel of crude oil that is able to leave the Strait of Hormuz.

Middle Eastern benchmarks have been weakening for weeks, suggesting an oil glut may be building amid rebounding Persian Gulf exports and global demand destruction amid high prices.

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But the costs to refiners and consumers are not falling. War, insurance premiums, and record tanker rates pushed the cost of shipping a barrel of crude from the Middle East Gulf to Asia on a large tanker to more than $37 by mid-October, more than five times the pre-war level, according to the International Energy Agency.

The current pause in high-intensity strikes in the Middle East doesn’t mean the risk of escalation and energy shocks are over.

Significantly increased crude oil flows don’t mean traffic through the Strait of Hormuz has suddenly become less dangerous. In fact, attacks on vessels have intensified in the past month, with 37 attacks on ships in and near the Strait of Hormuz in October alone, the highest monthly tally since the war began on February 28, according to Washington Institute for Near East Policy data cited by Reuters. At least 10 more ships were hit in the first 10 days of November.

At the same time, Gulf producers are tying up a large portion of the global tanker fleet on inefficient shuttle movements in and out of the Strait and subsequent ship-to-ship (STS) transfers in the Gulf of Oman.

Then there is also a risk of re-escalation despite signals from U.S. President Donald Trump from early this week that no further strikes on Iran are necessary at present.

The President, however, noted that the U.S. remains “locked and loaded” in case a new military campaign becomes necessary.

Trump sounded less patient on Thursday. In a Truth Social post, he said the United States does not need a deal with Iran because Washington already has Iran’s money and, in his words, “we’ve got their Strait.” Brent climbed more than 1% to around $94 a barrel after the post, according to CNBC.

The ball is in the American court now, as Iran waits for Washington’s response to its seven conditions to start peace talks, Mohammad Bagher Ghalibaf, Iran’s top negotiator and Parliament Speaker, told Al Jazeera in an exclusive interview on Wednesday. The conditions on which Iran has insisted for months include lifting of the U.S. blockade in the Gulf of Oman, ending of fighting on all fronts, and the release of the frozen Iranian funds.

More importantly, Ghalibaf said the Strait of Hormuz navigation would not return to pre-war conditions, ever.

“There are no ‘free waters’ [international waters] there, and the 1982 [UN Convention on the Law of the Sea] does not apply to the strait … The regulations within the Strait of Hormuz are governed by the laws of the two littoral states that border it,” the official told Al Jazeera.

With Iran and the U.S. remaining too far in their positions and neither of them willing to cross their respective red lines, a lasting peace agreement appears too far to reach.

Gulf producers are racing to build and use alternative routes, including Saudi Arabia’s Red Sea shipments and the United Arab Emirates (UAE) doubling down on pipelines to Fujairah to ship its crude from the Gulf of Oman beyond Hormuz. The Saudi outlet on the Red Sea, however, remains vulnerable to Houthi attacks and strikes on the East-West pipeline as long as the conflict is simmering without a resolution.

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The relative calmness of the past days doesn’t convince tanker operators that it’s safer to move vessels in the region. Despite a decline in tanker rates from the record highs seen in early October, freight rates remain so elevated that moving crude oil through Hormuz still costs far more than it did before the war.

Supertanker earnings on the Baltic Exchange’s Gulf-to-China route were still about $1.29 million a day on November 6, down 4.8% on the week, according to Signal Ocean data reported by Cyprus Shipping News.

Security concerns, insurance costs, and owners’ willingness to trade continue to influence vessel availability in the Middle East, Maria Bertzeletou, Senior Market Analyst at The Signal Group, said earlier this week.

“An increase in vessel transits would not, on its own, establish that normal chartering conditions have been restored.”

In the ninth month of the Iran war, the oil market may have to finally accept that there is a new normal in global oil flows that puts a high floor under oil prices, until producers and buyers adapt to the changed shipping and pricing conditions, or until there is some kind of a U.S.-Iran deal.

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