Iran is having a very bad year, and oil markets are paying close attention. What started in late December as protests over inflation and a collapsing currency has evolved into the most serious challenge to the Islamic Republic since it was founded in 1979. Supreme Leader Ayatollah Ali Khamenei's grip on power is looking increasingly shaky, and traders are scrambling to figure out what that means for global energy supplies.

Why Oil Traders Are Getting Nervous

On Wednesday, West Texas Intermediate crude tracked by the United States Oil Fund (USO) climbed for the sixth consecutive session to $62 a barrel. That's a three-month high, and the move reflects something pretty straightforward: when a major oil-producing region looks unstable, prices go up.

The concern isn't just about Iran's own production. It's about geography. About a fifth of the world's crude supply flows through the Strait of Hormuz, and Iran sits right next to it. Any military conflict or escalation could threaten that chokepoint, and markets hate uncertainty around critical infrastructure.

"This price move is largely about the uncertainty with what may happen in Iran," Jeff Krimmel, founder of Krimmel Strategy Group, told MarketDash. "The market is pricing in stronger U.S. military action than it would have expected a couple of weeks ago."

Prediction Markets Are Pricing In Military Action

Here's where things get interesting. Betting platform Polymarket is currently pricing in an 81% probability that the U.S. will conduct military strikes on Iran by the end of January. That's not a forecast exactly, but it tells you what people willing to put money on the line are thinking right now.

Even more striking: Polymarket gives a 56% chance that Khamenei will be out as Supreme Leader by June 30. Markets are literally betting on regime change in one of the Middle East's most significant powers.

The Washington signals aren't subtle either. Earlier this week, the U.S. announced 25% tariffs on countries that continue trading with Tehran and referenced "very strong options" under consideration. According to CNN, U.S. military personnel have been evacuating certain Gulf bases as a precautionary measure. At least 2,400 protesters have been killed since the crackdown began last month, and Iran has maintained an internet blackout to suppress information flow.

What Happens Next For Energy Markets

The tricky part is that oil prices are being pulled in two directions. On one side, you have escalating geopolitical risk pushing prices higher. On the other, you have strategic considerations pulling them back down.

"We will see prices seesaw," Krimmel said, as traders with different views on geopolitical risk react to each new development.

The U.S. has an interest in avoiding runaway oil prices, even as it takes a harder line on Iran. President Trump has made clear he wants oil prices to stay low. That creates a tension between applying pressure on Iran and managing the economic fallout from energy market disruptions.

For now, the crisis premium in oil markets is real and significant. Iran's future is genuinely uncertain in a way it hasn't been for decades. The regime is facing both internal revolt and the prospect of external military intervention that could reshape the entire Middle East power structure.

What we're watching is a political crisis with direct energy market implications, and traders are trying to price in scenarios that range from messy but contained to genuinely destabilizing. That's why crude keeps climbing, and why the next few weeks could be pivotal for both Iran's government and global oil supplies.