Trump’s Iran Conflict: Limited Options to Curb Soaring Oil Prices
The Biden administration is confronting limited options to reverse soaring oil prices triggered by escalating tensions in Iran, with the most effective solution – rapidly reopening the Strait of Hormuz – proving elusive. While plans to insure and escort tankers through the critical waterway and easing sanctions on stranded Russian oil have been unveiled, experts warn these measures will have, at best, a marginal impact without securing safe passage through the strait.
The conflict in Iran has sent crude prices surging, creating a potential domestic political challenge for the administration as it heads into an election year. Brent crude, the global benchmark, settled at $92.69 a barrel on Friday, March 6, 2026, a 28 percent jump for the week and the highest level since 2023. The U.S. Marker, West Texas Intermediate, saw an even sharper increase, jumping 36 percent to $90.90 a barrel – its largest weekly gain since 1983. Concerns among commercial seafarers are high, with many unwilling to risk transit even with promised government support.
The Strait of Hormuz Bottleneck
The core of the problem lies in the Strait of Hormuz, a narrow channel off Iran’s southern coast through which approximately 20% of the world’s oil supply flows. Tehran’s threats to strike vessels traversing the strait have drastically slowed maritime traffic, with fewer than 50 ships passing through in the past week, a fraction of the normal volume. Around 500 oil and gas tankers remain stuck in surrounding waters, unable to proceed. Major shipping lines, including Maersk and Hapag-Lloyd, have already stopped accepting most cargo destined for Persian Gulf countries, exacerbating supply chain disruptions.
Limited Policy Levers
The administration’s response has been multi-pronged, but faces significant constraints. The plan to provide government-backed insurance policies and naval escorts, championed by former President Trump, is meeting with skepticism from seafarers who cite ongoing threats from Iran. As Martín Izaguirre Salgado, a seafarer with experience in the Red Sea, told CNN, “As long as they preserve firing rockets or drones to merchant vessels, this unsafe feeling will remain there.”
Efforts to boost U.S. And Venezuelan oil production are underway and the administration reportedly considered – then dismissed – a plan to trade oil futures. However, these measures are seen as insufficient to offset the disruption caused by the constricted Strait of Hormuz. Mike Sommers, chief executive of the American Petroleum Institute, emphasized that “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.”
Strategic Petroleum Reserve Depleted
Washington’s ability to respond is further hampered by a depleted Strategic Petroleum Reserve (SPR). The SPR was significantly drawn down under the Biden administration in 2022 to combat rising prices following Russia’s invasion of Ukraine. Despite a pledge to refill the reserve, it remained largely empty when oil prices began to climb again. Republican Congressman August Pfluger, representing west Texas, warned that draining the SPR had left the U.S. “in an extremely vulnerable position.”
Russian Oil and Sanctions Waivers
In a move to increase global supply, the U.S. Treasury temporarily eased sanctions on sales of Russian crude to India, with the possibility of issuing further waivers. This allows tankers filled with Russian oil, previously unable to discover buyers due to sanctions, to enter the market. Treasury Secretary Scott Bessent indicated that un-sanctioning additional Russian oil could further increase supply. However, this approach is likely to draw criticism from those who advocate for maintaining pressure on Russia.
DFC Reinsurance Scheme Questioned
The administration likewise announced a $20 billion reinsurance scheme through the U.S. International Development Finance Corporation (DFC) to provide coverage for tankers traversing the strait. However, insurance specialists have questioned the DFC’s capacity to provide the level of coverage needed to restore shipowner confidence. The effectiveness of this scheme hinges on its ability to adequately address the perceived risks, which currently outweigh the financial incentives.
Military Option and Long-Term Strategy
Kevin Hassett, director of the National Economic Council, stated that a military solution to repel Iran would soon calm the market. Escorting tankers through the Strait of Hormuz, as proposed by President Trump, would place U.S. Navy warships in a potentially dangerous engagement zone, facing threats from Iranian cruise and ballistic missiles, drones, and naval mines. This approach carries significant risks and could escalate the conflict.
Dan Brouillette, who served as Trump’s energy secretary, suggested a longer-term perspective, arguing that removing the current Iranian regime would ultimately resolve the issue and secure the strait for decades to arrive. However, this strategy is contingent on a successful military intervention and carries substantial geopolitical implications.
What’s Next: Monitoring the Strait
The immediate focus remains on the Strait of Hormuz. Market watchers, including Goldman Sachs, are closely monitoring the situation, with a warning that crude prices could exceed $100 a barrel next week if no resolution emerges. If traffic through the strait remains constrained throughout March, the bank predicts prices could surpass their 2008 and 2022 peaks, potentially reaching $147 a barrel for Brent crude and $5 a gallon for gasoline. The coming days will be critical in determining whether the administration can stabilize oil markets and mitigate the economic fallout from the escalating conflict in Iran. The administration will likely continue to evaluate all available options, including diplomatic efforts, sanctions adjustments, and military preparedness, while closely monitoring the situation in the Strait of Hormuz.