Wall Street appears to be neglecting a global hot spot that could rip apart the bearish case for oil and drive prices higher before year-end.
According to RBC Capital Markets' Helima Croft, Iran could wipe away concerns traders have about the U.S.-China trade war pushing oil demand lower.
"Iran is going to be a very, very important story over the course of the fall," the firm's global head of commodity research told CNBC's "Futures Now" on Thursday.
The oil-rich country has been disrupting crude shipments in the Persian Gulf. The actions came after NATO accused Tehran of disobeying European sanctions by exporting the commodity to war-torn Syria.
Plus on Friday, a U.N. atomic watchdog agency reported that Iran is breaching its nuclear deal with world powers by increasing its stock of enriched uranium.
"I think we're headed more toward escalation," said Croft. "The thing to really watch is if you get a retaliatory cycle. If these Iranian backed groups start targeting, for example, U.S. servicemen In Iraq, and there are about 5,000 U.S. servicemen in Iraq, if anything happens to those servicemen that really is a catalyst for this conflict going kinetic."
It would be a big shift from the oil bear case that has been dominating the market all summer.
"What has really held oil back have been these trade war concerns, and that his understandable. China is the largest importer of oil," said Croft, who has a $52-$59 a barrel year-end price target on WTI crude.
Despite her bullish case, she also outlines a less likely bear case for oil that does involve Iran.
If Iran stops its attacks and there's a diplomatic breakthrough, Croft warns oil inventory would spike.
"There are a lot of Iranian barrels that are sitting off this market right now. Two million barrels," said Croft. "That will be a big story in terms of how this market shakes out for the rest of the year."
WTI crude prices fell 6% for August. The commodity settled at $55.10 a barrel on Friday — seeing its best week in seven. However, it's still down about 20% since hitting a 2019 peak in April.