Posted on 07/23/2026 7:40:35 AM PDT by Miami Rebel
U.S. oil just topped $90 a barrel and Brent crude is passed $100 a barrel.
A number of new factors could mean this crude comeback has legs.
For example, what happens if all Iranian oil suddenly went offline?
It’s an outlier thought. Maybe it’s crazy. While we can’t all agree on much, can we at least agree that maybe now is the exact right time for crazy, outlier thoughts?
Before I get to that, here’s a quick synopsis of where we stand right now with the nearly hour-by-hour headlines around Hormuz and energy.
Angry militants in Iran continue to risk a wider war with the U.S., killing American servicemen in an attack on our ally Jordan. Trump again has warned the country, saying those responsible will “pay” for the attacks.
At the same time, one of Iran’s proxy terror groups, called the Houthis, is trying to ratchet things up by imposing a Red Sea blockade.
As I’ve written often lately, it’s an incredibly fluid, scary time where the news can change by the time you read this.
As I’ve been thinking about what’s going on, the one thought that hasn’t really played out is: what happens if all Iranian oil went offline? Right now Iran is still selling some oil on the global markets, either by avoiding the Strait blockade or by using the time under the peace MOU to increase sales and raise money. So what would happen if something were to happen to Iran’s oil hub, Kharg Island? Or the employees of the National Iran Oil Co (NIOC) just walked off the job and crushed Iranian production?
Oil expert Eric Nuttall of Canada’s Ninepoint Partners, a Toronto-based alternative asset management firm, said the risk to prices is higher, and he lays out the Iran scenario like this:
“With Middle Eastern production still down 7-8MM Bbl/d, global onshore inventories at near record low seasonal levels, an increasingly depleted US SPR, and significant tightness in refined product stocks, the world simply cannot afford to lose a further 2.6MM Bbl/d of Iranian production. The market up until now has been looking through or flat out ignoring the inevitable supply shock if the status quo persists, our base case expectation. Perhaps Iranian oil production going offline would be enough to finally act as a reality check. We think record high crack spreads are a leading indicator for what price action will look like for oil in the near future.”
Kevin Book of Clearview Energy Partners, an independent energy policy research firm that produces must-read research and is interviewed in our Inside Line below, says the key is how long Iranian oil were to be offline, but the market would be looking at a $5 per barrel increase at the minimum.
And Rapidan Energy Group’s Bob McNally is direct in his message, telling me that “all [Iran’s] exports are offline pretty much,” but if all their actual oil production closed, then “their refineries would shut down, and they’d have no more refined products after they drained storage. Transportation would grind to a halt. It would crush their economy.”
So while it’s a potentially crazy question about Iran and Hormuz, don’t write off the “no Iran oil” as pure fantasy.
Speaking of Hormuz, these days you need to keep your Straits straight. The next geographic area to study up on is the Bab el-Mandeb Strait (BAM). The BAM is the narrow strait that runs between Yemen and Africa and is about as wide as Hormuz. The Strait is the only southern entry to the Red Sea, another waterway critical for oil and product flows.
RBI →”’Bab el-Mandeb” roughly translates to “gate of grief”
RBI #2→ Some believe that thousands of years ago the BAM was shallow enough that humans could walk across it, leading to increased migration.
The risk to BAM is real. And it may be a reason why brent crude is nearing $100 a barrel.
Tobin Marcus of Wolfe Research writes that the market continues to believe things will get better from here and both the U.S. and Iran will be forced to de-escalate. But Marcus also thinks we shouldn’t automatically underestimate the risk of some kind of supply disruption around the Red Sea. With Saudi Arabia pumping more oil through its East-West pipeline into the port of Yanbu, any Houthi attacks risk about 4½ million barrels of oil per day.
Iranian strongmen may believe they have the upper hand right now, as the new attacks have led to a new drop in crude oil tanker traffic out of the SOH. An insurance industry source tells me that while a shipowner “can get cover” - the industry term for insurance - there isn’t much demand because ship traffic has again slowed considerably.
Bottom line, here’s my Power Point takeaway on oil, energy and the macro markets. This spring, we learned that stocks can keep going higher even if oil and gasoline go up. That’s certainly surprised many, myself included. It’s likely for a cornucopia of reasons, and the energy-specific would be that gasoline was more expensive in the summer of 2022 than it is now (we got used to it), cars get better fuel mileage than they used to, and many of you now have the ability to work from home. The bigger reason, however, is that the trillions in A.I.-related spending is helping power incomes and the economy more than gasoline can cut it down.
I’m actually writing some of these words from the Milwaukee, Wisconsin airport where I was stranded by a canceled flight. A flight, I might add, that was oversold both ways, despite air fares that few would call cheap. I fly more than most, and I can tell you that across America, people are spending money on travel this summer. Gasoline prices be darned ... at least for now.
Safe travels,
There was a windfall profits tax back in the 1980’s under Carter during that Oil Crisis.
The question is exactly what defines such a tax?
because they started firing at ships in the straight.
Economic consequences will Force Trump to deal on Iran regardless of the Deal he wants. Unless he wants a reputation and Legacy worse than Herbert Hoover.
if were up to Israel, the war would have been over in April. your statement fails.
“The fact that support is slowing fading already, IS a fact.”
Yes, and Israel has about 200 nuclear bombs and the means of delivering them.
Israel knows US funding is almost certain to vanish in five years or less.
Israel will not let Tel Aviv vanish.
The Israelis will let Trump try his way as long as Iran is not in an active enrichment phase.
More like $150 a barrel
That would be true if the Democrats haden’t been taken over by Marxists.
Iran won’t make a deal. There is only ONE way to settle this. Stop fiddling around.
“Economic consequences will Force Trump to deal on Iran regardless of the Deal he wants. Unless he wants a reputation and Legacy worse than Herbert Hoover.”
https://www.bing.com/search?q=Oil+price+graph
Look at the segment above 2022, higher and longer than that of recent history.
It would seem you are in the category of wimpy American sheeple now. You are comparing $4 per gallon gasoline and feckless whiners to the great depression? What a bunch of Neville Chamberlains we have become.
Note that in such a scenario oil prices may diverge in different regions. The US may well be able to keep oil prices low with domestic production, even as oil spikes in Europe and east Asia. An article here yesterday mentioned how China is now viewed more positively than the US in most of the world.
Imagine a smug Trump boasting about low US prices in a few months as the rest of the world is seething because their prices are spiking, and then China sends a battle fleet escorting a tanker fleet to challenge the US blockade of Iran, with the rest of the world cheering China on against the US. This could play out very badly for Washington.
“If a retailer overcharges me by $100 and then returns it, is the $100 a profit?”
A tariff refund is (in just about all cases) income just like a state income tax refund.
You obviously don’t understand basic accounting, much less tax accounting.
WHAT THE MARKET HATES MORE THAN ANYTHING IS UNCERTANTY.
More like
Putting Israel first is apparently more important than knocking out those Anti-American communists when they were on the ropes.
“China sends a battle fleet escorting a tanker fleet to challenge the US blockade of Iran”
Dear Xi:
Israel might take out the Iranian oil industry.
Make sure we get a fair share of your business now in case you’d like to be able to buy oil in the future.
Arab Gulf State Oil Minister
“Putting Israel first is apparently more important than knocking out those Anti-American communists when they were on the ropes.”
They are hardly on the ropes.
This country is going communist because powerful people wish to make more money [Idaho Republican’s dairymen, Lindell] or save the world [DeWine].
For the time being I’m sticking with Victor Davis Hansen and his thoughts on the matter. Circumstances change I will revise my opinion.
“WHAT THE MARKET HATES MORE THAN ANYTHING IS UNCERTANTY.”
The market is the horse betting parlor for the more affluent.
***********************
If oil costs more, the consumer pays more.
Companies and Walmart raise prices quite often.
Or it could be the reverse. As the largest customer, China has the clout to tell Arab gulf states that they need to play nice or they could be shut out of the world’s largest oil market (and perhaps other markets in which China can exert pressure). And keep in mind that while Arab Gulf states are enemies of Iran, they are also unhappy with the missile attacks they have been absorbing courtesy of US strikes, and economically severe losses in oil revenue. They can understand Israeli strikes to curb Iranian nuclear ambitions; it is the fecklessness of Washington that is frustrating them.
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