Trump doesn’t control the oil price shock. Declaring the war over won’t be enough

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Trump doesn’t control the oil price shock. Declaring the war over won’t be enough.

opinion & analysis :: 9hrs ago :: source - cnn business

Analysis By David Goldman, CNN

President Donald Trump has a sales pitch for Americans worried about high oil and gas prices: Rising fuel prices are a temporary but necessary sacrifice, and they will fall quickly back to earth once the war with Iran is done.

Trump on Thursday said gas prices will “drop very rapidly when this is over.” US Energy Secretary Chris Wright said Friday that relief at the gas pump would come in “weeks, not months.” And White House Press Secretary Karoline Leavitt on Tuesday called the recent surge in oil and gas prices “temporary.”

“Once the national security objectives of Operation Epic Fury are fully achieved, Americans will see oil and gas prices drop rapidly, potentially even lower than they were prior to the start of the operation, and we will live in a world where Iran can no longer threaten the United States or our allies with a nuclear bomb,” Leavitt said.

But it won’t be that easy.

To get oil prices back to where they were before the war started, the US military will first need to secure the Strait of Hormuz, the narrow body of water through which 20% of the world’s oil travels. Iran said it would set fire to oil tankers passing through the strait, effectively locking much of the world’s oil in place during the war. And Iran has begun to lay mines in the waterway, sources told CNN’s Natasha Bertrand.

Even if America’s military could achieve that on Trump’s timetable of one more week, oil industry analysts remain skeptical that the strait could fully reopen and production in the region come back online for at least a month, if not much longer.

That means high oil prices could be here for a while – and gas prices, which follow oil prices with a lag, could stay elevated for even longer.

Securing the strait

The US military is developing plans to eliminate Iran’s ability to attack oil tankers.

“I will not broadcast what those options look like, but just know the president is not afraid to use them,” Leavitt said Tuesday.

Meanwhile, the administration has said the Navy would at some point start escorting oil ships through the waterway. So far, that hasn’t happened, Leavitt confirmed Tuesday. If Iran increases its mining of the strait, that could complicate matters.

The number of oil tankers traversing the strait has been in the single digits or zero each day for the past week, according to S&P Global Market Intelligence, compared to about 50 per day prior to the war.

“Words aren’t going to talk oil prices back to normal; the strait are the key to the return to normalcy,” said Dan Pickering, founder and chief investment officer at Pickering Energy Partners. “You can’t get back to normal with 15 million barrels per day being bottlenecked and off the market.”

Months, not weeks

Oil prices have tumbled on the prospect that the war’s end may be in sight, sinking to around $80 a barrel Tuesday after surging past $100 a barrel Monday.

But oil and gas still have a long way to go before returning to normal: Oil was trading at around $60 a barrel before the war. And US gas prices, which are averaging more than $3.50 a gallon, were below $3 just before the United States and Israel attacked Iran.

“For prices to return to normal levels sustainably, this will probably require a credible neutralization of Iran’s ability to disrupt maritime transit,” said Luisa Palacios, the former Citgo chairwoman and current managing director of Columbia University’s Center on Global Energy Policy.

Returning the Strait of Hormuz to typical traffic could take 1 to 3 months, according to Homayoun Falakshahi, lead crude research analyst at Kpler. Only then will oil fall to $60 a barrel again.

People stand in the water, with tankers in the background, as Iran vows to close the Strait of Hormuz, amid the US-Israel conflict with Iran, in Fujairah, United Arab Emirates, on March 3, 2026. - Amr Alfiky/Reuters

That’s in part a function of the complexity of war. After the United States and Israel took out its supreme leader, Iran may hesitate to quickly lay down its arms. And taking out every drone and every mine that threatens ships in the strait probably isn’t possible, meaning vessels may require naval escorts for a while.

Even if strait traffic reopens soon, the dangerous and complex process of protecting those tankers could maintain a bottleneck for a month or longer, noted Jay Hatfield, CEO & founder of Infrastructure Capital.

Turning production back online

Another factor: A significant portion – about 7 million barrels – of Middle Eastern oil production came offline in the past week, because there was no place to put the crude they were pumping.

Turning those spigots on isn’t like flipping a switch. Saudi Aramco CEO Amin Nasser said during an earnings call this week the company could start to ramp up in a matter of days once the strait reopens. But it can take a week or two to fully restore production, according to Bob Yawger, commodity specialist at Mizuho.

And production can’t fully come back online until there are tankers sailing through the strait to collect and deliver the oil. Storage space is at capacity right now.

‘A little glitch’

That’s why a number of oil analysts expect prices to remain high until the industry gets clarity – not just rhetoric – about when and how ships could start to navigate the strait again.

Even then, the market may continue to assign oil a “risk premium” that will keep it priced well above regular levels – at least until investors feel Iran no longer poses a threat to vessels in the region.

That could be a while: The US Energy Information Administration on Tuesday forecast that Brent crude, the international benchmark, will trade above $95 a barrel over the next two months, before falling to $80 a barrel in the summer and $70 a barrel in the fall. It said its forecast is based on assumptions about the duration of the Middle East conflict and oil production outages.

If oil stays that high, gas prices could near $4 a gallon and hover there until oil prices come down meaningfully – and stay lower. In the summer of 2022, when oil fell by $20 to below $100 in a matter of weeks, gas stayed well above $4 for several months before falling.

In other words, this could be more than Trump’s “little glitch.”

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