Iran has been under intense pressure following weeks of U.S. and Israeli airstrikes, sanctions, and restrictions, but geological factors may ultimately be what forces Tehran to make concessions in its ongoing standoff with the United States.

As the U.S. naval blockade of Iran nears the end of its third week, shipping data and industry monitors indicate that tankers have been unable to move Iranian crude through the Strait of Hormuz toward Asian markets.

This means Iran’s oil storage capacity is filling up rapidly, and time is running out before Tehran is forced to shut in production. Analysts believe this poses a significant problem for Iran as it attempts to withstand U.S. pressure to enter peace negotiations.

“Geological Impact”

Stephen Innes, managing partner at SPI Asset Management, an FX and commodities consultancy, said this situation “is creating a geological impact more than anything else, relating to how the oil is extracted.”

He added that once the valves are closed, “the oil tends to settle at the bottom of the reservoir; it becomes viscous and dense, requiring a lot of energy to bring it back to the surface.”

He noted that the result could lead to the “endgame” for the sector.

“Rebuilding pressure within the reservoirs and resuming oil flow could take an entire year... many believe that production might stop permanently because the cost of restarting it would be too high,” he explained.

A research report issued by Goldman Sachs on April 23 stated that “the share of low-pressure reservoir production is higher in Iran and Iraq compared to the rest of the Gulf states.”

The report, which covered oil sectors across all Arabian Gulf countries, indicated that restoring production levels “might only be partial after a long shutdown.”

For his part, Mehdi Moslehi, a UK-based Iranian risk consultant who has worked in the oil sector for a decade, said the duration of the extraction halt is a decisive factor.

“If production is stopped for a short period—between one, two, or three weeks maximum—the wells can be restarted,” he said. “But if the closure continues for a long time—especially since wells in southern Iran often contain high percentages of sulfur—serious problems could arise, and reservoir pressure may drop.”

A race against time?

Of course, Iran may not be forced to stop production, but data released this week suggests the situation has become a race against time.

In a report issued on April 27, shipping and commodities analytics firm Kpler said that “no confirmed tankers have left the U.S. blockade zone” since its implementation began on April 13.

The report added that “several tankers passed through the Strait of Hormuz but failed to bypass the U.S. blockade, which is stationed further south between the Gulf of Oman and the Arabian Sea.”

This explains why Iranian oil inventories are reaching capacity; Kpler estimated that Iran has only about 12 days of remaining storage capacity.

Analyst Homayoun Falakshahi said: “Previously, it could be said that time was on the Islamic Republic’s side, but that is no longer the case... the rules of the game have become more balanced.”

Meanwhile, Iran’s own blockade of the Strait of Hormuz—which prevents oil exports from other Gulf nations—is adding further pressure, driving up oil prices and causing global supply shocks, not only for oil but also for gas and other vital commodities.

As the situation persists, pressure on the global economy increases.

“We are now facing a game of endurance to see which party will blink first in the short term,” Falakshahi said. “Prices between 100 and 110 dollars, or even 120 dollars per barrel, are still manageable for the global economy. But if the Strait of Hormuz remains closed over the coming days or weeks, prices are likely to rise even further.”

On April 29, Brent crude rose sharply to 115 dollars per barrel following a report by the Wall Street Journal stating that U.S. President Donald Trump asked aides to prepare for an “extended blockade.”

In the meantime, Iran is seeking other ways to ease storage pressures, including transporting oil by rail to China, its largest customer. However, this method is more expensive and handles much smaller volumes than tankers, limiting its impact.

Iran’s next move could be escalation.

Other countries in the Arabian Gulf have managed to ease storage pressures by using alternative routes, such as the Saudi East-West pipeline to the Red Sea, which has helped keep oil flowing.

Iran may resort to mobilizing its Houthi allies in Yemen to attack this route by targeting shipping in the Bab el-Mandeb Strait, through which approximately 10% of global maritime oil trade passes.

However, this option carries risks for Tehran, as the United States has bolstered its military presence in the region in recent weeks and signaled the possibility of resuming hostilities.

Innes concluded: “The prevailing market estimate is that some kind of deal will be reached within the next two or three weeks.”

The S&P 500 and Nasdaq Composite are on track to end April with their largest gains since 2020, signaling that robust corporate earnings have helped soothe investor concerns despite a historic shock to oil supplies.

This rally reflects investors' heavy reliance on earnings strength to navigate geopolitical turmoil, though it increases the risk of a swift reversal if companies begin signaling that war-related costs are weighing on growth.

Angelo Kourkafas, senior investment strategist at Edward Jones, noted: “There is a significant tug-of-war between factors, but the earnings side is winning out so far.” He added: “The market is trying to look past short-term uncertainty, but the longer it persists, the more acute the pressures become.”

By 10:14 a.m. ET on Thursday, the Dow Jones Industrial Average rose 429.39 points, or 0.88%, to 49,233.73. Meanwhile, the S&P 500 remained flat at 7,138.78, and the Nasdaq Composite fell 77.65 points, or 0.31%, to 24,595.59.

Despite the mixed daily performance, the S&P 500 is heading toward its best monthly gain since November 2020, while the Nasdaq is on pace for its best month since April 2020. The Dow is also nearing its strongest monthly performance since November 2024.

Data released Thursday showed that U.S. economic growth accelerated in the first quarter, driven by a rebound in government spending. However, this increase is likely to be temporary as rising fuel prices resulting from the war with Iran pressure household budgets.

Results from Big Tech were broadly strong. Alphabet shares rose 6.1% to a record high following a solid performance in its cloud computing unit. Conversely, Meta Platforms and Microsoft fell 8.4% and 4.8%, respectively, following capital expenditure announcements, while Amazon dropped 2.1% despite exceeding cloud sales expectations.

Seven of the 11 major S&P 500 sectors recorded gains, led by a 1.6% rise in utilities.

Investors also assessed remarks from Fed Chair Jerome Powell on Wednesday. While the central bank held interest rates steady, three officials indicated that inflation remains too high to signal a shift toward rate cuts.

Brent crude futures hit a nearly four-year high amid fears of long-term oil market disruptions. This followed an Axios report stating that President Donald Trump would receive a briefing from the U.S. Central Command chief regarding new plans for potential military action against Iran.

David Morrison, senior market analyst at Trade Nation, commented: “There also seems to be a growing urgency from the Trump administration to get things settled.” While oil prices have retreated from their peaks, they remain elevated at around 110 dollars per barrel. The Axios report weakened the wave of optimism that had prevailed for weeks regarding a diplomatic path to resolve the U.S.-Iran conflict.

In individual stocks, Eli Lilly shares jumped 7% after the pharmaceutical company raised its annual profit forecast, driven by sustained demand for weight-loss drugs. Caterpillar also climbed 8.4% to a record high following better-than-expected first-quarter earnings.

Advancing issues outnumbered decliners by a 2.14-to-1 ratio on the NYSE and a 1.6-to-1 ratio on the Nasdaq. The S&P 500 posted 20 new 52-week highs and 13 new lows, while the Nasdaq Composite recorded 54 new highs and 71 new lows.

The European Central Bank released its interest rate decision today, Thursday, following the conclusion of its April 29-30 meeting. In line with most global market expectations, the Bank kept interest rates unchanged at the 2.15% range—the lowest level since October 2022—marking the seventh consecutive meeting without a change.

• This statement is "positive" for the Euro exchange rate.