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When gasoline prices jumped to a record high of more than $5 a gallon in June, analysts and politicians rushed to blame Russia, Fortune wrote.

The Biden administration even called the rise in fuel prices "Putin's price hike" at the time. In the months since, however, gasoline prices have fallen by about 26 percent, even as the war in Ukraine continues to escalate.

Researchers at an alternative asset management platform called ClockTower Group argue that the war is not the biggest risk, and in fact it is Iraq.

Marco Papic, chief strategist at ClockTower Group, notes that the U.S. is trying to force Saudi Arabia to increase oil production while trying to improve relations with Iran after the Trump administration pulled out of the 2015 Iran nuclear deal.

He argues that dealing with both players, who are well-known adversaries, will only exacerbate tensions between the two regional powers, which could eventually lead to sectarian conflict in neighboring Iraq, the world's fourth-largest oil exporter. And if that conflict affects Iraq's crude oil production, oil prices will undoubtedly rise, as will gasoline prices.

“The real risk to oil supply is the Iran-Saudi tensions, likely to dramatically increase as the U.S. struggles to keep both sides happy,” Papic wrote in a Monday report, adding that “Washington will have to choose one over the other.”

Bank of America commodities and derivatives strategist Francisco Blanch echoed Papich's argument in a similar post, writing that he believes prices for Brent crude, the international benchmark, will average $100 a barrel in 2023, and production disruptions in countries like Iraq will be a key upside risk.

Papic believes the U.S. could find itself in a losing scenario in the Middle East. He argues that if the U.S. rejects Iran by accepting an agreement with Saudi Arabia to increase oil imports, it would force Iran to retaliate in Iraq by supporting militias to fuel violence in the region. He noted that Iran has supported the militias four times this year alone, launching rockets at oil refineries and striking buildings near the U.S. consulate.

He also explained that Iraq has traditionally served as a buffer state between Iran and Saudi Arabia, adding that Iraq's oil hub of Basra has already been the scene of violence this year.

“At the moment, most investors are focused on Ukraine’s offensive in Kherson and Kharkiv as being relevant to oil prices. It may yet prove to be so, given a potential menu of likely reactions from Moscow,” Papic wrote. “However, the greatest risk to the global oil supply may be Shia-on-Shia conflict in Iraq…were the negotiations over the nuclear deal to fail.”

Negotiations on a nuclear deal with Iran are not easy and are unlikely to be resolved anytime soon.

At the same time, if the U.S. makes a deal with Iran, Saudi Arabia, the world's second-largest crude oil exporter, will certainly be offended, Papic added.

“Our fear is that whichever choice the U.S. makes, somehow the blowback will end up on Iraq’s doorstep,” Papic argued. “Two regional powers duking it out in a ‘buffer state’ would normally not be something that investors would have to worry about. But this buffer happens to be the world’s fourth largest crude exporter.”

Papic said tensions between Iran and Saudi Arabia mean that Iraq's domestic politics will take on tremendous global significance in the coming months.

“A civil war in the world’s fourth largest oil exporting nation would certainly add to the already ample amount of geopolitical risk premium in oil prices,” he added.

Papic noted that betting on oil for quick profits no longer seems like a viable option for investors. 

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