President Donald Trump has repeatedly sought to tamp down the surging price of oil by telling investors what they’re eager to hear: The war in Iran is almost over.
But after hearing that message for weeks, with fighting ongoing and no plan for reopening the Strait of Hormuz, they’re increasingly tuning him out.
Nearly two weeks after Trump’s sudden declaration of “productive” talks with Iran sent a premature jolt of optimism through the oil markets, energy analysts and traders say the president’s attempts to jawbone investors into lowering prices have cost him his credibility — and convinced them that the war’s economic consequences are only set to worsen.
“He’s now been saying a version of the same thing for the last two weeks,” said Gregory Brew, a senior analyst on Iran and the energy sector at political risk firm Eurasia Group. “But what he’s talking about doesn’t matter, because he’s continuing the war and the Iranians aren’t buying it.”
After Trump again claimed Wednesday that Iran was seeking a ceasefire, oil markets exhausted by days of head fakes barely reacted. And that night, Trump’s insistence that the war was “nearly complete” was quickly overshadowed by his vow to intensify the US’ bombing campaign and then leave it to other countries to try to reopen the strait.
Oil prices have since surged more than 11% in response — a sharp move likely to push the cost of gas beyond the $4-per-gallon level and deepen the affordability concerns that threaten to cost Trump and Republicans control of Congress come November.
Within the energy industry, officials are now preparing for several more months of elevated oil and gas prices regardless of how and when Trump eventually decides to withdraw from the war, as the damage to global stockpiles becomes irreversible and reverberates across continents.
Iran’s retaliatory closure of the Strait of Hormuz roughly a month ago has already caused a massive economic shock, but the strain on economies around the world is just beginning. Key Middle East production facilities that cut output to avoid a pileup of oil in the Persian Gulf will need months to ramp back up if and when traffic through the strait returns to normal.
And while Trump during Wednesday’s primetime address claimed the US is insulated from the fallout due to its own vast stores of oil, the energy crisis rippling through the rest of the world is still bound to make all manner of goods and services — from fertilizer to flights to plastic products — more expensive for Americans. Even if Trump pulled out of the Middle East immediately, investors believe it could take months or even years to see oil return to pre-war prices.
“We’ve lost huge amounts of oil from the system,” said Rory Johnston, an oil market researcher who writes the energy newsletter Commodity Context. He pegged the cost of the conflict so far at roughly a half-billion barrels of oil.
“In no scenario do I see us exiting this war in a healthier environment than we began it,” he added.
The stark economic reality has alarmed Trump allies who were already concerned about the political risks of going to war. It has prompted an ongoing search for fresh ways to blunt the impact on US prices.
Some Trump friends and allies — aware of the president’s diminished ability to simply talk the markets down — have urged him to wrap up the war as soon as possible and shift his attention back to the domestic concerns shaping voters’ views ahead of the midterm elections.
And despite the White House’s insistence that gas prices will “plummet” as soon as the fighting ends, administration officials have signaled differently in private. They’ve pressed industry representatives over whether US companies have any new sources of oil they can tap in the coming months, a person involved in the discussions said. Those conversations have yielded little in the way of promising leads.
“It’s having a negative effect now for sure,” Stephen Moore, a former economic adviser to Trump, said of the war’s drag on the US economy. “So it’s got to get over with as quickly as possible.”
In a statement, White House spokeswoman Taylor Rogers said Trump’s “energy dominance agenda prepared us to meet this moment.”
“The President made clear that the Operation Epic Fury is in its final stages and we are quickly achieving our military goals,” she said. “In the meantime, the Administration has taken several significant actions to mitigate short-term disruptions and stabilize the energy markets.”
Still, among traders and analysts who once hung on Trump’s every word, there’s far less willingness to buy into his optimism now that they’re seeing more real-world impact.
If Trump declares victory and leaves the Middle East in the next few weeks without reopening the strait, he will effectively cede one-fifth of the world’s oil supply to Iran. That would put the regime on even stronger financial footing than before, allowing Iran to charge oil tankers a hefty toll to use the strait — and determine which country’s shipments get through.
Under that scenario, analysts project, oil prices are expected to remain above $90 per barrel well beyond the end of the war, or roughly one-third higher than where prices sat before the conflict began.
But other options could yield even worse outcomes. If Trump instead chooses to escalate and follow through on his threats to bomb Iran’s energy infrastructure, it would immediately worsen the oil shortage and fan fears of widespread retaliation — which could effectively shatter the global energy trade and push prices to never-before-seen highs.
Either way, energy experts said, oil prices are going to stay significantly higher than the $60-per-barrel level the US enjoyed earlier this year — and no amount of reassurances from Trump is likely to change that at this point.
“I don’t think there’s any going back to pre-war gas prices, at least not this year and probably not for a couple years,” said Mark Zandi, chief economist at Moody’s Analytics. “With each passing day, and the longer the hostilities continue, the more damage is done.”
Barring a sudden diplomatic breakthrough, those scenarios also provide little assurance that the Strait of Hormuz will fully reopen — a development that could dramatically alter the way oil flows around the world.
Top Trump officials have increasingly acknowledged that the strait will remain under Iranian control for the foreseeable future, potentially setting the stage for a second operation to seize it that would raise the odds of yet more disruption without any greater guarantee of success.
Trump on Wednesday night careened between insisting that the strait would “open up naturally” after the war and urging US allies to take responsibility for reopening it by force.
“The hard part is done, so it should be easy,” he said at one point.
Yet that’s offered little comfort to industry officials who have noted that even Trump’s own military doesn’t appear to concur; US officials have continued to assess that the strait is far too dangerous for the US Navy to begin escorting tankers, according to people involved in the discussions.
“Had the war been three or four days, then there would’ve been a sharp price increase and then a very sharp price fall,” said Brew. “But we’re way past that given that Hormuz has been shut now for over a month, and given that the credibility of Hormuz reopening any time soon is very suspect.”
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