Donald Trump’s options to reverse soaring oil prices triggered by his war in Iran are severely limited unless he can rapidly reopen the Strait of Hormuz to allow crude to flow from the Gulf, experts have warned.
The Trump administration unveiled plans this week to insure and escort tankers crossing the narrow chokepoint and eased sanctions on Russian oil stranded at sea in an effort to inject liquidity into global crude markets.
It has also considered options to boost US and Venezuelan oil production and reportedly discussed — and then dismissed — a plan to trade oil futures.
But most experts said the only way to reverse the largest jump in oil prices in more than three decades was for the US military and its allies to speedily destroy Iran’s ability to threaten tankers traversing the strait.
“The real focus has to be on clearing the Strait of Hormuz because none of them, even all of them together, would provide the kind of stability that I think that world economies will require,” said Mike Sommers, chief executive of the American Petroleum Institute, the largest oil industry lobby group.
Other options, he added, “would have a marginal impact on price”.
The conflict in Iran has sent crude prices soaring, creating a potential election-year domestic political calamity for an administration already facing voter ire over affordability. The price rises risk compounding a cost- of-living crisis, partly fuelled by the president’s tariffs on foreign goods, that the administration was already struggling to control.
Tehran’s threats to strike vessels traversing the strait have caused maritime traffic to slow to a trickle in a waterway through which a fifth of global oil supply flows. Brent crude, the global benchmark, settled at $92.69 a barrel on Friday, up 28 per cent this week to its highest level since 2023. The US marker, West Texas Intermediate, jumped 36 per cent to $90.90 a barrel in its biggest weekly gain since 1983.
Goldman Sachs warned crude prices would top $100 a barrel next week “if no signs of solutions emerge by then”.
If traffic through the strait remained constrained throughout March, the Wall Street bank warned it was “likely” that prices would exceed their 2008 and 2022 peaks, when Brent surpassed $147 a barrel and gasoline hit a record $5 a gallon.
Washington’s ability to respond to the crisis has been hampered by a lack of oil in its Strategic Petroleum Reserve after former president Joe Biden drained the stockpile in 2022 to douse prices in the wake of Russia’s full-scale invasion of Ukraine. Trump pledged to refill the reserve upon taking office but failed to do so last year when prices were lower.
August Pfluger, a Republican Congress member representing west Texas, said the drawdown had left the US “in an extremely vulnerable position”.
“I’ve warned for years that draining the SPR for short-term political relief would weaken our long-term energy security,” Pfluger told the FT. “Now, at a moment when this emergency buffer may be needed, it is drastically smaller than it should be. That’s a serious national security concern.”
Kevin Hassett, director of the National Economic Council, said on Friday that an SPR release was not on the table and insisted that repelling Iran militarily would soon calm the market.
Administration officials have said increased oil flows from Venezuela — where the US has taken control of production after deposing its leader Nicolás Maduro in January — could help fill the gap.
On Thursday, the US Treasury temporarily eased sanctions on sales of Russian crude to India and indicated that more waivers could be issued in order to inject liquidity into the market. Tankers filled with Russian oil have been floating on the ocean with nowhere to go.
“We may un-sanction other Russian oil,” Treasury secretary Scott Bessent told Fox News. “There are hundreds of millions of sanctioned barrels . . . on the water and in essence, by un-sanctioning them, Treasury can create supply — and we are looking at that.”
The administration’s most recent move to calm markets was to announce a $20bn reinsurance scheme from the Development Finance Corporation for tankers traversing the strait. However, insurance specialists questioned the agency’s ability to provide the coverage required to give shipowners confidence to restart shipments.
Fewer than 50 ships passed through the strait over the past week, a fraction of normal traffic, while around 500 oil and gas tankers remained stuck in surrounding waters. Shipowners warned they need security guarantees before they send vessels and employees through the strait.
Some experts criticised the Trump administration’s handling of the operation in Iran and surging prices, warning that without decisive action oil markets could enter a meltdown next week.
“Many of the policy decisions made or floated by the administration over the last 48 hours show signs of a desperate effort to calm oil markets,” said Michael Alfaro, chief investment officer at Gallo Partners, a hedge fund focused on energy and industrials.
Recommended
“If we don’t see an indication that the Strait of Hormuz is going to be reopened rapidly by Monday, we see another spike in commodity prices.”
But others defended the White House’s approach. Dan Brouillette, who served as Trump’s energy secretary during his first term, said the administration had a much longer-term perspective than financial markets.
“This will be a temporary situation with high oil prices,” Brouillette told the FT. “This administration believes that now is the time to remove this regime and to remove the stranglehold that it’s held over the strait for decades. I think we’ll see these policy choices produce enormous benefits in the long run.”
