US and Iran seek to sway energy markets in Middle East conflict
- Oil, gas, and fuel prices stand at the center of the ongoing conflict involving the United States, Israel, and Iran, as Washington strives to lower energy costs while...
- President Donald Trump noted a market motivation in June when signing a now-defunct memorandum of understanding to end the war, stating, We run out of [oil] reserves at...
- Iran is attempting to maintain the clout it obtained by asserting control of the Strait of Hormuz, enduring intensified sanctions and a resumed U.S.
Oil, gas, and fuel prices stand at the center of the ongoing conflict involving the United States, Israel, and Iran, as Washington strives to lower energy costs while Tehran attempts to keep them high. As the U.S. and Iran trade blows in the Gulf, both belligerents are trying to sway global energy markets, monitoring actual and estimated prices that serve as a rough indicator of the conflict’s trajectory.
U.S. President Donald Trump noted a market motivation in June when signing a now-defunct memorandum of understanding to end the war, stating, We run out of [oil] reserves at about four weeks
Crisis Group. On August 13, Vice President JD Vance cited low fuel prices as Washington’s main war aim ahead of the November midterm elections, declaring, That’s goal number one – keep oil and gas cheap for Americans all over our country
Crisis Group. Preventing Iran from acquiring nuclear weapons was cited as the ostensible motive for the February airstrikes and at least for a time stood as goal number two.
Global Energy Markets Resist Iranian Economic Pressures
Iran is attempting to maintain the clout it obtained by asserting control of the Strait of Hormuz, enduring intensified sanctions and a resumed U.S. naval blockade that has halted southern coast exports and hammered the Iranian economy. Despite disruptions, global energy markets have displayed unexpected resilience. Prophecies of oil reaching $200 a barrel have proven incorrect, with Brent crude rising from below $75 before the war to peaks not yet topping $130 Crisis Group.
Market buffers have kept prices from careening out of control, aided by an initial global oil surplus, hundreds of millions of extra barrels in U.S. federal stores, functional Russian refineries and export terminals, growing Chinese reserves, and an open Red Sea. Higher prices have concurrently pushed demand lower, raised production elsewhere, and driven new workarounds through Hormuz.
Fossil Fuel Imports Create Economic Security Liabilities
The Middle East crisis has exposed imported fossil fuels as an economic-security liability, triggering higher fuel costs, inflation, pressure on interest rates, trade-balance stress, and slower growth. Pakistan, Japan, and the Philippines each source more than 90% of their crude oil supplies from the Persian Gulf, while India imports about 90% of its oil alongside LPG and gas IEEFA.
LNG has also faltered as a secure transition fuel, exposing nations to geopolitical and price risk rather than reliability. Short-term government tools such as fuel rationing, price caps, subsidies, and emergency deals risk reinforcing long-term dependence, exemplified by Japan spending more than USD 77 billion on fuel subsidies between 2022 and 2024 IEEFA.
The question remains whether the U.S. or Iran will outlast the other in what has become an endurance test.