Another Conversation on Oil Prices – March 12, 2026

In an extension of the conversation from just a little over a week ago, we are seeing a few answers to the parting “It will take time to tell” conclusion on what will happen with oil prices short and medium term.

As all eyes are on the US and Israel’s campaign against Iran, with no real indication of an endgame or probability of one, we have seen realized the near complete shutdown of the Strait of Hormuz taking with it some 20% of the daily world’s oil movement.

What is the latest?

One thing the US is considering is insuring oil routes. Before going too crazy with a response, know this is not an original idea.

This happened before, the US becoming a de facto insurer of oil shipping. The 1980s and the Iran-Iraq war. Just after the September 11, 2001 terrorist attack on the US. At the very start of the US war in Iraq March 2003. There have been many other times the US orchestrated, if not underwritten indirectly, from the 1980s forward.

I am sure you all remember Somalian pirates making the news trying to hijack shipping near their coast, same thing. Once it happened enough the US stepped in and orchestrated handing of those insurance policies and of course started patrolling those waters near the Gulf of Aden, the Arabian Sea, and the Indian Ocean. Same method, applied slightly differently.

Even the idea of the US military being involved in route patrolling, even ship escort duty, is not unprecedented.

US issued insurance policies offsets war-risk premiums from insurance coverage by the private sector. To get the boats to agree to go in and move oil means insurance from someone. And that already happens every single day, for every single oil cargo ship, taking oil out of any port, form anywhere in the world. Every single time a policy is issued.

This is not entirely about oil companies getting this oil but rather source oil producing nations in the Middle East, and again we are talking about 1 of every 5 barrels of oil transported each day goes through the Strait of Hormuz.

All the usual suspect nations get the net benefit this time. Going into Iran was bound to cause complications for 20% of all oil. Of all that oil that travels through the Strait of Hormuz almost 40% is from Saudi Arabia, another 20% ‘ish from Iraq, UAE throws in another 12% ‘ish, and of course Kuwait throws in another 10% ‘ish.

And speaking of Saudi Arabia, Ras Tanura Refinery and Port near Dammam, on the Persian Gulf, as in has to go through the Strait of Hormuz, is the world’s largest oil storage and export port. Something like 11 to 12 millions barrels every single day leave that port.

That shuts down for long enough, because ships will not go there, and Saudi Arabia is likely to jump in and make what is already a mess into a much larger galactic mess.

Might take some time for anything to be put together.

So, about oil?

Short answer, “rockets and feathers.”

That is a legitimate term to explain a phenomenon where oil and oil product prices can rapidly rise but take time to fall back down. Shoots up like a rocket and drifts back down as if to see feathers falling. Formally, the condition is asymmetric price transitions or asymmetric pass-through.

Based on an old economic paper in 1991, where various supporting studies suggested for every increase over a period of time it was likely to see a similar decrease taking two to three times as long depending on condition for the increase in the first place.

Just this week, the US government authorized some 172 million barrels of oil from the Strategic Petroleum Reserve (SPR) and we are seeing some minor moves with private held reserves.

But to the point above, all of this will take time to be impactful. This is not like turning up the faucet on the bathtub, this will slowly bleed out over the coming days and weeks and be entirely limited by ability to move that oil to some point. Either direct to export, or go through refinement into all sorts of outputs. Including fuel from your local stations.

Some empirical context

According to the International Energy Agency (IEA) the global daily production of oil is somewhere in the 108.6 million barrels neighborhood. As a baseline number, keep that in mind when evaluating every other stat.

From that, it is safe to conclude that going through the Strait of Hormuz every day was some 21.72 million barrels leading up to this mess with Iran.

According to the US Energy Information Administration (EIA) we produce about 20.1 million barrels of oil per day, and on that note the US is now the #1 producer of oil worldwide. Then Saudi Arabia at about 10.9 million barrels per day, then Russia at perhaps 10.8 million per day, then Canada at 5.9 million, then you guessed it Iran even with restrictions was at 5.1 million.

From a perspective of relation to that release of 172 million barrels of oil from the Strategic Petroleum Reserve (SPR) then it is not difficult to deduce that the impact to the global pricing of global oil production is minimal and not likely to undo the market damage impacting 20% of the world’s oil movement. And you now know Iran’s daily output is largely idle (not entirely but damn close.)

Oil Prices

Understand these things are changing quickly, by the time this conversation is published the numbers will change yet again.

That said, since the start of this US and Israel operation against Iran on February 28 2026 we have seen crude oil prices surge over 40% (and also understand those prices fluctuate for oil futures contract periods going out months to years.)

US Crude oil, or WTI, has gone from multi-year lows in the $67 to $68 per barrel range to well over $95 per as of today, after a spike hitting nearly $120 per. The spike was greater than what we have been seeing in recent years. The International benchmark, or Brent that everyone else on the planet uses, has seen a similar spike of near 40% and landing at near $100 per barrel.

Here at the pump, because of all the steps between out of the ground and a final gasoline product at the pump, we have see a national average jump to $3.59 from what was in the $2.89 ‘ish range just a few weeks ago. 20% jump, all well before all these other price shocks make it through the process landing at that same price at the pump.

Future outlook

In the short term, likely medium term too, not great.

Iran’s new leader Ayatollah Mojtaba Khamenei (son of the prior leader) as purportedly said in a message read by Iran state media that the critical Strait of Hormuz will remain essentially closed as a “tool of pressure” and that Iran’s neighbors are being targeted due to US bases. We have already seen a few ships that are moving attacked, and it is likely to see more responses from the US military in the coming days.

The same IEA is saying the world is facing the “largest supply disruption in the history of the global oil market.”

President Trump has predictably hinted this is not that big of an issue and that the nation somehow benefits from high energy costs, and the US Navy is not quite ready for vessel escort duty through the Strait. Perhaps end of month, a few weeks away with disruptions already what they are.

Granted oil futures have backed down from the spike highs, but even the IEA is saying likely end of this year to see more normalized prices. Far beyond the “rockets and feathers” theory, and one may argue it is because we have no real indication on when things will calm across the Middle East causing the “rocket” part in the first place.

Midterm realities notwithstanding, the next several months will see even more political pressures for answers to questions we can be sure the current Trump Administration would rather not be asked.

Regardless, there is no one saying your energy costs are coming down anytime soon, and with that “it will take some time” still holds true.