The Iran War and the Manipulation of Oil Markets

By
The Unz Review

July 21, 2026

The Iran War and Oil Prices

Our Iran War has fully resumed and last week I published an article on that subject.

After many weeks of negotiations, President Donald Trump finally signed a “Memorandum of Understanding” with Iran on June 17th. This was intended to set the stage for 60 days of additional peace talks aimed at permanently ending the conflict.

Unfortunately, that preliminary agreement remained on life-support during its entire existence. Many of its provisions were ignored or violated from almost the very first day, and within three weeks the plug was pulled, restarting the war. The end finally came on Monday when the Iranians declared that they had once again closed the Strait of Hormuz to oil tankers and other cargo traffic.

Aside from briefly recapitulating the current state of the conflict and its origins, my article also discussed the impact upon global oil supplies. Near the end I included a chart showing the trajectory of oil futures prices during 2026.

After months of rising and falling, on July 10th the widely quoted price for a barrel of WTI oil stood at around $71, almost exactly the same as its $67 price on February 27th, the day before the war originally began.

Thus, more than four months of war and blockade had left oil prices virtually unchanged. Some 1.3 billion barrels of oil had been lost and global stockpiles had reached their lowest levels in many decades, but prices had returned to their prewar levels, an extremely strange development that had important political consequences.

This complete stability must have surely helped convince Trump that he held a very strong hand on that issue and there would be few adverse consequences in the oil markets to his full resumption of the war. Indeed, just after he began bombing and blockading Iran once again, he declared at a press conference that he expected oil prices to fall because the world had “an oil glut.”

Back in April, Trump had ridiculed those who had warned him that oil prices would skyrocket if he attacked Iran, saying that they had been proven completely wrong. So with oil prices having now fully returned to peacetime levels, he may have been emboldened to attack Iran a second time.

For these reasons, global oil prices and the markets that set them have been a central element of our war with Iran, and I regularly discussed these matters in my articles.

The Iranians had threatened for decades that if they were attacked, they would close the Strait of Hormuz to oil shipments and other cargo traffic, and the conventional wisdom had been that the resulting loss of supply would quickly cause a huge spike in global prices.

I had fully accepted that argument and repeated it in my own recent articles, citing all the many experts who predicted that prices would soon rise to very high levels. But for four and a half months prices never did so, proving me wrong over and over and over again, a source of considerable personal embarrassment.

With the war now fully resumed and the Strait once again closed, oil prices are coming under renewed pressure. So it is worth exploring why prices have generally remained so surprisingly low and whether this situation will continue.

Widespread Expectations of a Huge Rise in Oil Prices

Most of us possess small islands of solid knowledge scattered amidst a vast sea of ignorance, and that is certainly true in my own case.

Until a few months ago, I’d never paid any attention to oil markets. So when the war began I relied upon media outlets and industry analysts who seemed to have the greatest expertise in that subject. These uniformly agreed that oil prices would rise dramatically as a global shortage developed.

That hardly surprised me. I’ve always been quite skeptical of many of the more complex and arcane aspects of modern economic theory. But the Law of Supply and Demand always seemed rock-solid. So if much of the supply of a vital commodity such as oil were suddenly removed, demand would force prices to sharply rise as users bid up the barrels that remained available.

The Strait normally carried 20% of global oil supplies, so once the Iranians closed it and blocked those shipments, there was a widespread belief that prices would soon skyrocket to $150 per barrel or even higher, an expectation that I fully accepted.

This certainly seemed supported by recent history. For example, after Russia invaded Ukraine in February 2022, Western countries banned the import of Russian oil, and as a result Brent oil prices soon almost touched $140 per barrel. But Russian oil only accounted for about 10% of the global supply, and Russia merely sold its banned oil to India, which refined the crude and then resold it to Europe, so none of the Russian oil had actually been taken off the market.

If the temporary rerouting of 10 million barrels a day of Russian crude had caused such an extremely large price shock, it seemed obvious that the actual loss of most Persian Gulf oil would have a far greater impact on market prices.

The Trump Administration certainly feared that this would happen. Trump had originally assumed that his surprise attack would successfully overthrow the Iranian government within a few days, so the Strait would quickly be reopened. But when his optimism proved unwarranted, his administration did everything it could to cushion the expected impact upon world oil markets.

Iran still exported its own oil and the Saudis were able to use a pipeline to redirect most of their crude to a port on the Red Sea. But the Iranian closure still took around 10 million barrels of oil per day off the world market, representing roughly 10% of total global consumption, resulting in an enormous shock to the system. Numerous experts claimed that if this loss of supply continued for any extended period of time, huge price hikes would inevitably result, producing a severe global recession or even a worldwide depression.

The International Energy Agency (IEA) declared that the Iran War was causing “the largest supply disruption in the history of oil markets.” Brent oil prices quickly approached $95 per barrel, with expectations that they would go far, far higher if the Iranians kept the Strait closed for any length of time.

In response, Trump officials urgently announced that the 32 nations in the IEA were releasing 400 million barrels of oil and refined products from their reserves, which included 172 million barrels from our own Strategic Petroleum Reserve (SPR).

During 2022 the Biden Administration had already drawn down our SPR to unusually low levels, perhaps in order to keep gasoline prices low for consumers prior to the midterm elections of that year. So Trump’s additional release would reduce our strategic reserve to the lowest level since 1983.

Despite these large announced releases, Brent oil prices still continued rising, easily passing $100 per barrel.

Faced with an economic disaster, the Trump Administration removed all existing sanctions on Russian oil, thereby allowing countries to easily purchase it. This included the 200 million barrels that Russia had already exported but that had been sitting at sea without buyers.

That huge injection of additional oil supplies only slowed the rise in global prices. So even more remarkably, a week later the desperate American government removed all sanctions on Iranian oil. This allowed the country we were seeking to defeat and destroy to freely market the 140 million or more barrels of crude they had already shipped but been unable to sell. This financial windfall amounted to around $15 billion, almost twice Iran’s annual military spending. I had never previously heard of any country during wartime deliberately boosting the government finances of the enemy it was facing in the field.

Thus, within three weeks of the Strait being closed, the Trump Administration had grown so desperate to halt the relentless rise in oil prices that it unilaterally lifted all the sanctions on Iranian oil even as it was massively bombing that same country. Trump officials certainly seemed to accept the reality of supply and demand at that point.

With so many hundreds of millions of extra barrels of oil now placed on the global markets, there was suddenly a great abundance of that commodity available for sale. The daily shortfall of Persian Gulf crude was temporarily mitigated, allowing supplies to remain stable for the next month or two until that large surplus was exhausted.

But it seemed obvious to me that perspicacious traders would look past these temporary ameliatory measures and recognize the severe oil shortages that loomed just beyond, so the futures prices they quoted would reflect that reality. And indeed, that was exactly what happened, with Brent oil futures soon rising about $25 per barrel and reaching $112 within the next couple of weeks.

At that point, Trump grew so extremely desperate that he famously posted his profanity-laced Easter Sunday warning that he would destroy Iran unless it reopened the Strait, followed a couple of days later by an even wilder, genocidal threat. These statements outraged some of his strongest erstwhile supporters such as Marjorie Taylor Greene and Carrie Prejean Boller.

When Trump declared that “A whole civilization will die tonight, never to be brought back again” many reasonably interpreted that phrase as the threat to use nuclear weapons to annihilate Iran and its 93 million people.

But the Iranians remained absolutely steadfast against these outrageous threats. From the beginning, they had emphasized that they would retaliate to such blows to their civilian infrastructure by inflicting similar damage upon America’s Gulf Arab allies who were enabling all these attacks against their country, and they had always followed through on those threats. They even released a couple of their popular LEGO animations dramatizing these horrific scenarios that might permanently eliminate Persian Gulf oil.

So it was Trump who blinked first. Instead of launching a nuclear strike against Iran, our president declared that he accepted as “a workable basis” for peace negotiations the ten-point proposal that the Iranians had previously offered. By bowing to the Iranian demands, he obtained a two week cease-fire, providing time for all the details to be worked out and an agreement signed. Peace was apparently at hand and the Strait would soon be reopened.

The markets were hugely relieved at these prospects for peace and a resumption of the regular flow of oil. Therefore, on April 7th the futures price of WTI crude fell by more than $35 a barrel, one of the largest single-day drops in the last twenty-five years.

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Ron Unz, publisher of The American Conservative, served as chairman of English for the Children, the nationwide campaign to dismantle bilingual education. He is also the founder of RonUnz.org
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