As Israel-Iran conflict roils markets, US oil supply becomes matter of ‘national security’
DALLAS – The conflict between Israel and Iran has put global prices on a roller coaster, but also underscored the importance of the U.S.’s evolution into a global energy powerhouse with safe and secure oil and gas supplies.
Over the past several days, oil prices surged on fears over a prolonged conflict only to plummet as the two countries reached a ceasefire in the wake of strikes on Iran’s nuclear facilities.
The initial threat of an Iranian blockade of the Strait of Hormuz immediately added a “war premium” to crude prices, according to an analysis by Morningstar DBRS. “If the conflict were to broaden, hampering crude oil supply from large regional producers, such as Saudi Arabia, Iraq and Kuwait, oil prices could surge much higher.”
Yet by early Wednesday, the war premium had all but unwound by the market. Brent crude and West Texas Intermediate tumbled by more than 6% on Tuesday alone, ending at their lowest in two weeks as fears of a major supply disruption eased.
Still, prices are roughly where they were at the start of 2025, when a Dallas Fed survey highlighted uncertainty about the outlook and concerns about prices getting stuck underneath “breakeven” levels needed to make crude production profitable.
For now, the steam has come out of the geopolitical trade. But if the situation in the Middle East worsens, that could eventually mean higher prices at the pump, especially if U.S. producers fail to churn out more crude as the summer driving season shifts into high gear.
President Donald Trump acknowledged as much earlier this week, when he urged the U.S. Department of Energy to “drill, baby, drill” and warned he’d be watching to make sure everyone kept oil prices down.
The average gas price in Texas on Tuesday was $2.855, slightly up from Monday’s average of $2.854, according to AAA data. Last month’s average was $2.763, whereas the price at the pump was $3.056 around this time last year.
Even amid the conflict in the Middle East, Texas industry leaders insist Texas’ oil and gas industry can help insulate consumers from feeling the impacts.
“Energy security is national security and Texas barrels don’t just fill demand – they build confidence,” Todd Staples, president of the Texas Oil & Gas Association, said in a statement Monday.
“In times of geopolitical stress, reliability becomes a strategic asset at home and abroad,” he added.
Staples said the state’s robust oil and gas production, refining capacity and extensive distribution infrastructure are essential to protecting consumers from price swings caused by military and geopolitical conflicts.
“While we are not entirely immune from impacts to production and delivery disruption, Texans and all Americans more energy secure than ever before,” he said. Texas has proven its strong energy foundation is unmistakable amid uncertain times, he added.