With the Iran war entering its 21st day on Friday, the Trump administration has touted an array of plans to lower the price of crude oil.
These include initiating talk of a U.S. Navy escort for oil tankers through the Strait of Hormuz, the release of emergency global oil reserves, and the possibility of more to come.
Temporary waivers on both a century-old U.S. shipping law and sanctions on Russian oil at sea have emerged, as well as potentially a waiver that would allow some of Iran's own crude to be sold. The U.S. is also now providing political-risk insurance to cargo ships in the Persian Gulf.
President Donald Trump is "very aggressively and creatively" looking for any solutions to lower oil prices, said Rebecca Babin, senior energy trader and managing director at CIBC Private Wealth.
The Treasury Department also issued a license to allow U.S. entities to transact with Venezuela's state-owned oil company, a move to "reopen and restore" that nation's energy sector, according to a post on X.
So far, the efforts have had limited success, Babin said, beyond containing prices for U.S. benchmark West Texas Intermediate crude (CL00) versus global benchmark Brent (BRN00) and Asian crude grades.
The president and his energy team have quickly taken action when necessary, White House spokeswoman Taylor Rogers told MarketWatch in an email, listing the administration's efforts to lower the price of oil. "Ultimately, once the military objectives are completed and the Iranian terrorist regime is neutralized, oil and gas prices will drop rapidly again, potentially even lower than before the strikes began," she said.
Prices for U.S. and global oil have both tested $100 a barrel since the conflict began in late February, their highest levels since Russia invaded Ukraine in 2022. Global prices have outpaced gains in domestic crude. This month through Thursday, WTI oil (CL.1) climbed 43% to about $96 a barrel, while Brent crude (BRN00) rallied 50% to $109, according to Dow Jones Market Data.
Importantly, U.S. prices for gasoline at the pump advanced along with crude, with the average cost for a gallon of regular gas at $3.90 on Thursday, up about 31% since the end of February, according to GasBuddy data.
A little over a week after the start of the Iran conflict, Trump said short-term oil prices were a "very small price to pay for U.S.A, and World, Safety and Peace," in a post on Truth Social.
In fresh signs of concern about the oil-price surge, Israeli Prime Minister Benjamin Netanyahu said Thursday he agreed to Trump's request to hold off on further attacks on Iranian energy sites. Earlier strikes on a key gas facility triggered retaliatory attacks by Tehran on Middle East energy facilities.
Trump also said he wouldn't put troops on the ground in the Middle East, but defended a $200 billion spending request to pay for the war in Iran. Global oil prices finished higher Thursday, but off the session's highs.
When asked what could bring Trump to seek an offramp from the conflict, CIBC's Babin said it probably will be less about price and more about a "time horizon."
As the U.S. midterm elections in November near, if Trump remains unable to control the oil-price shock, he could start to back off and think about an exit plan, Babin said.
Price pressures
Oil prices have continued to rise since Iran halted nearly all shipping through the Strait of Hormuz, a critical maritime chokepoint for the world's crude. There have been some reports, however, that Iran is allowing some ships to pass with permission.
Trump could still engage the U.S. Navy to keep global crude tankers flowing through the strait. Allowing Russia to sell some sanctioned oil may also potentially free up 120 million to 130 million barrels of crude, some analysts said. Additionally, Treasury Secretary Scott Bessent told Fox Business on Thursday that in the coming days, the U.S. may "unsanction" Iranian oil that's already on the water - about 140 million barrels.
Yet opening the strait is the only conceivable solution to sky-high oil prices, said Tom Kloza, chief oil analyst for Gulf Oil. The other levers the U.S. has to pull might have only a limited impact, he said.
Shipping waivers may alleviate some domestic costs, but as with strategic reserves and rerouted cargoes, "it remains to be seen how much of an impact it will ultimately have on oil prices," said Angie Gildea, KPMG global oil and gas leader.
Easing summer gasoline restrictions is another lever the Trump can pull - and talk of that has heated up. That could boost fuel production and lower gas costs for consumers. But at this point, "the die is cast," Kloza said. The U.S. will see $4 a gallon as a nationwide average for gasoline in the next few days, he predicted, adding that some Western states could see $6 a gallon.
That means banks currently warning of $130- to $200-a-barrel oil prices are "not simply resorting to hyperbole," he said. If the Strait of Hormuz is not reopened soon, "we'll certainly see numbers in this neighborhood."
"Only a peace process or a reopening of the strait" might mitigate the oil-price increases, Kloza said.