A war-escalation risk is building over the next two months, which is bad for markets, oil prices, and anyone hoping for a quick end to the Iran conflict.

• After a rough midterm election, Trump is politically wounded and may double down militarily in Iran to try to salvage his legacy rather than back off.
• The next 60 days, before the new Congress is seated, are seen as the most dangerous window since Trump still has close to unchecked control over military decisions during this period.
• Iran isn't expected to cave just because Trump is weakened — it reportedly wants billions of dollars and continued control over the Strait of Hormuz and its uranium stockpile before any deal.
• Oil prices dropped on hopes the energy shock is over, but that drop is viewed as premature given Iran's leverage over global energy routes.
• Russia is separately ramping up attacks on Ukraine's power grid, with Ukraine striking back at Russian energy targets, risking more ripple effects on global energy prices regardless of the Iran situation.

Outlook: Expect rising risk of military escalation with Iran and continued fighting in Ukraine over the coming weeks, both of which could keep energy prices and markets volatile.