The last time an Iranian regime was overthrown, the resulting oil crisis eventually saw Americans lining up at gas stations and paying double what they’d spent a few years earlier to fill their tanks. So far, Donald Trump’s new Iran war hasn’t caused anything close to a 1979-type crisis. But the longer the conflict goes on, the likelier such an outcome becomes.
In response to the strikes that killed Ayatollah Ali Khamenei, Iran announced that it would attack any ship that attempted to cross the Strait of Hormuz, a narrow waterway off the country’s southern coast. For decades, this move has been widely considered the doomsday scenario for the global energy system. About a fifth of the world’s oil passes through the strait every day, carried by ships bringing Middle Eastern output to the rest of the world, and virtually no alternatives exist for getting all of that oil to market. Several experts told me that if the strait were to remain closed for more than a few weeks, the price of oil could double or triple as countries and businesses engage in a bidding war to secure the limited supplies available from other sources. “It’s hard to overstate just how big of a deal this would be,” Rory Johnston, an analyst who writes the Commodity Context newsletter, told me. “It’s the mother of all tail risks—the boogeyman that keeps oil traders up at night.”
Now that the strait has been closed, hundreds of tankers carrying millions of barrels of oil are sitting idly at the entrance, afraid to proceed further; oil supplies around the world are dwindling, and, with nowhere to send their product, major exporters are shutting down their oil fields. And yet oil markets have so far been relatively sanguine about the situation. In recent days, oil prices have spiked by only about 20 percent. That seems to be due to a widespread belief among traders that the United States wouldn’t possibly allow such a catastrophic disruption to persist. That’s not an unreasonable bet—but it is very much a bet, and one that might not pay off. If anything, global oil markets might not be taking the current crisis seriously enough.
On Tuesday evening, Trump announced that, “if necessary,” he would direct the U.S. Navy to escort tankers through the strait. This seems to have briefly reassured the markets to some degree. Such an operation would be a massive logistical undertaking, however, and could take weeks to fully put in place. Even then, it might not work. Iran isn’t likely to simply back down and let traffic resume. The country’s military strategy is focused on inflicting enough economic pain to force the U.S. to back down. It has spent decades amassing weapons specifically tailored to attacking naval vessels. Although experts generally agree that the U.S. has the capability to disable Iran’s defenses and reopen the strait, doing so could take weeks or months of sustained effort, and would be made even more difficult by the fact that so much of America’s firepower is being deployed for other uses during the conflict. The chief safety-and-security officer for the world’s largest shipping-industry association has called the notion of the Navy protecting every tanker passing through the strait “unrealistic,” and some in the oil industry are skeptical too.
Even if Iran can’t control the strait, it has another option: to attack energy production at its source. Already, it has targeted Saudi Arabia’s largest oil refinery and Qatar’s largest natural-gas facility, both of which have been forced to temporarily halt production. The damage to the Qatari facility, which alone provides more than a fifth of the world’s liquified natural gas, has sent prices spiking by 40 percent in Europe. “Closing the strait is like a kink in the garden hose of global oil production: bad while it’s happening, but you could technically unkink it at any time,” Johnston told me. “These attacks on oil-production facilities would be different, like destroying the faucet that the hose is attached to. That’s much harder to fix.”
Immediately following Russia’s invasion of Ukraine in 2022, oil prices spiked to more than $100 a barrel. Experts told me that the Iran war could produce the same result after a few more weeks. (One barrel of crude now sits at about $80.) That’s how long they believe it would take for oil-importing countries to burn through their stockpiles. If the closure were to last much longer than that, prices would continue to go even higher, possibly reaching $200 a barrel, which would translate to about $6 per gallon of gas. (As of this writing, the average price of gas in the U.S. is slightly more than $3.30.)
The Trump administration has argued that the U.S. doesn’t have to worry about a global supply shortage because of how much oil we produce at home. This belief seems to have factored into the decision to attack in the first place. “We don’t get any oil anymore out of the Strait of Hormuz,” Interior Secretary Doug Burgum said in October, justifying the administration’s decision to strike Iran’s nuclear facilities earlier last year. “And so, then you’re in a position where now the military power, tied with the economic power of tariffs, tied with the courage to be able to actually use that, you’ve got the degrees of freedom.” Energy Secretary Chris Wright made a similar remark last month, citing the fact that oil prices didn’t spike when the U.S. attacked Iran last summer as “perfect evidence of Trump’s energy-dominance agenda, you know, growing production in the United States.”
There is a glimmer of truth to that argument. When it comes to natural gas, the U.S. has so much domestic supply that it can ride out global supply shocks. Oil is a different story. Yes, thanks to the fracking-enabled shale revolution that began in 2003, the U.S. is a net oil exporter. But many American oil refineries were built earlier, and are therefore set up to process the thick crude oil (known as “heavy sour”) found in other parts of the world rather than the thinner oil (known as “light sweet”) primarily found in America. Because of this mismatch, the U.S. exports much of its light-sweet oil to be refined abroad and imports heavy-sour oil to be refined in the U.S., as well as already refined gasoline.
The upshot is that the prices Americans pay for gas reflect the global price of oil, no matter where exactly the supply is coming from. This is why U.S. prices rise every time OPEC announces even a small shift in production and why they spiked when Russia invaded Ukraine, even though the U.S. imports hardly any oil from OPEC and none from Russia. “The fact that we are a net exporter doesn’t make us immune from the swings of the global energy market—not even close,” Arnab Datta, an energy analyst at the Institute for Progress, told me. “It’s true that the U.S. is far less likely to experience the kinds of shortages and rationing it did during the 1970s. But that doesn’t mean it is protected from a major price shock.”
On Monday, Trump announced that the U.S. military had projected that the Iran conflict would last “four to five weeks” but that “we could go much longer than that.” This may be true from a military perspective. But Trump understands the political salience of the price of gasoline as well as anyone, and the relative calm of the oil markets reflects that fact. Iran probably can’t withstand an American assault forever. It also might not have to.
