(Investing) – The Trump administration is beginning to outline potential steps to address rising energy prices linked to the conflict involving Iran, though analysts at Wolfe Research say the government’s policy tools may be limited.
In a note led by Tobin Marcus, Wolfe Research said recent announcements from the administration suggest a focus on measures aimed at stabilizing shipping and oil markets.
Marcus pointed to the administration’s proposal for a government-backed maritime insurance program aimed at encouraging tanker traffic through the Strait of Hormuz.
According to Wolfe Research, the plan appears legally feasible given the authorities of the U.S. International Development Finance Corporation.
“We think the answer to the ‘can he do this’ question is ‘yes,’” Marcus wrote, noting that the agency has broad authority to provide insurance or reinsurance against political risks, including war.
However, the firm cautioned that the program’s effectiveness will depend on whether private shipping companies are willing to rely on it.
“Will this be reassuring enough to maritime industry participants that they’ll actually transit the Strait of Hormuz? That’s less clear to us,” Wolfe Research stated, adding that implementation will take time.
Beyond maritime insurance, Wolfe Research believes there are few strong policy levers available if oil disruptions worsen.
Possible measures include a release from the U.S. Strategic Petroleum Reserve, adjustments to biofuel policies, or a temporary gasoline tax holiday, though the latter would require congressional approval.
Overall, Marcus believes market outcomes are more likely to depend on developments in the conflict itself rather than economic policy.
“We expect that energy price impacts will depend more on battlefield dynamics than on economic policy responses,” the note said.
