Oil prices reached heights not seen since the aftermath of Russia’s 2022 invasion of Ukraine on Monday before falling back by the time markets closed, as President Donald Trump sent mixed signals about his Iran plans.
The price for a barrel of Brent crude, the global oil benchmark, had at one point spiked to nearly $120, a level that could translate into gas prices surpassing a national average of $4 per gallon. But prices turned by midday, dropping precipitously to settle at under $90 per barrel, a level still significantly higher than before the United States and Israel began strikes on Iran just over a week ago.
Trump fed the volatility. He wrote on social media over the weekend that soaring oil prices were a “small price to pay” for battlefield gains in Iran but struck a different note at a news conference late Monday.
“This was just an excursion into something that had to be done. We’re getting very close to finishing that, too,” Trump said of the conflict. “It’s going to be ended soon,” he said, but declined to specify when.
Hours later he wrote in a post on social media that Iran would be “hit by the United States of America TWENTY TIMES HARDER than they have been hit thus far” if the country did anything to stop oil being shipped through the Strait of Hormuz.
“We will take out easily destroyable targets that will make it virtually impossible for Iran to ever be built back, as a Nation, again — Death, Fire, and Fury will reign upon them — But I hope, and pray, that it does not happen,” Trump wrote.
The Strait of Hormuz, a conduit for one-fifth of the world’s oil supply, has been effectively closed for a week with vessels carrying oil, natural gas and other cargo backing up because of the threat of Iranian attacks on tankers and other ships.
Leaders of the Group of Seven advanced economies met Monday and decided not to tap their emergency oil reserves but signaled they may soon release that crude into the marketplace, a message that may also have helped calm markets.
“We’re not there yet,” said French Finance Minister Roland Lescure, speaking to reporters in Brussels after the meeting. “We’ve agreed to monitor the situation very closely.”
World leaders remain concerned that oil prices will resume their climb. Further increases could trigger broader inflation at a time when many U.S. consumers are already concerned about affordability. Prices at the pump in the U.S. are already 47 cents higher than a week ago, according to AAA, averaging $3.48 for a gallon of regular.
Monday’s spike in oil prices led to an initial drop in global stock markets. Japan’s Nikkei index plunged about 5 percent. European stock markets shed 1 to 2 percent. But all the main U.S. indexes, which fell considerably early Monday, ended the day with gains.
Considerable economic risks remain while oil supplies from gulf states remain shut down. Trump at his Monday news conference said the U.S. is offering insurance to oil tankers in the Persian Gulf, an initiative first announced last week when he also said American forces could offer military escorts to shipping in the region.
“Exports will not resume until ship owners, operators, and insurers feel sufficiently safe from the threat environment posed by Iranian warships and aircraft, missiles, drones, speedboats, and naval mines,” Clayton Seigle, an energy and geopolitics scholar at the Center for Strategic and International Studies, said in an emailed statement.
While most of the oil through the strait goes to Asia, it is a commodity sold on the global market. That means prices for oil produced in the U.S. are surging alongside the oil shipped from the Persian Gulf, leaving American motorists exposed to price shocks.
After Trump had made affordability and lowering energy prices a cornerstone of his political message, analysts had assumed he would seek a diplomatic compromise with Iran that gets oil flowing again.
On Sunday night, as oil prices soared toward $120 per barrel, he wrote in a social media post that the spike in prices “is a very small price to pay for U.S.A., and World, Safety and Peace. ONLY FOOLS WOULD THINK DIFFERENTLY!” As markets plunged Monday, his tone changed. He told a CBS reporter, “I think the war is very complete, pretty much,” according to her post on X.
The Trump administration has sought to tamp down oil prices by easing some sanctions on Russia. It provided a waiver that allows India to buy Russian oil for 30 days, and Treasury Secretary Scott Bessent has said further sanctions relief is possible.
If the Iran conflict becomes protracted, even tapping into oil reserves would provide only temporary relief.
The entire U.S. Strategic Petroleum Reserve holds about 415 million barrels of oil. It is enough to cover less than four days of global oil demand, or just a few weeks of the supply choked at the strait. Federal officials and lawmakers will be reluctant to draw down more than a third of that amount, as replenishing it typically cannot be done quickly.
“There is simply no substitute for restoring access through the Strait of Hormuz,” Angie Gildea, global head of oil and gas at KPMG, said in an emailed statement. “The tools at our disposal, including strategic reserves, rerouting some exports and floating inventories, can provide some relief at the margins, but they are not structural solutions. We are in uncharted waters.”
Diesel prices are surging even faster than gasoline, spelling more trouble for the economy.
Diesel hit $4.66 a gallon Monday, up nearly 90 cents from a week ago. Analysts warned it could spike past $5 within weeks. It is already nearly $6 in California.
Diesel is used in the shipping of almost every consumer product, so the rocketing cost of the fuel is certain to make goods more expensive.
UPS, the largest shipping company in the U.S., has already tacked on a weekly fuel surcharge.
Container shipping companies are starting to do the same. And farmers also may soon be raising their prices, as they rely on diesel to power their industrial equipment.
Ellen Francis in Brussels contributed to this report.
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