This week, the U.S. government successively announced measures such as providing insurance and escorts for transiting oil tankers, temporarily easing sanctions on Russian crude oil, and boosting Venezuela's oil production. However, most experts believe that only the swift restoration of通行能力 through the Strait of Hormuz can fundamentally reverse the trend in oil prices. Brent crude closed at $93 per barrel this week, with a weekly increase of 28%, reaching a new high since 2023.
As oil prices surged amid U.S. military actions in Iran, Washington's policy toolkit is nearly depleted. Experts warn that unless the Strait of Hormuz can be reopened swiftly, all other measures adopted by the administration will merely amount to a drop in the bucket.
This week, the Trump administration announced a series of measures, including providing insurance and escort for transiting oil tankers, temporarily easing sanctions on Russian crude oil, and discussing options such as boosting Venezuela’s oil production. However, most experts agree on one conclusion: only by restoring passage through the Strait of Hormuz can oil price trends be fundamentally reversed.
Brent crude closed the week at $93 per barrel, with a weekly gain of 28%, marking the highest level since 2023; the U.S. benchmark West Texas Intermediate (WTI) surged 36% to $91 per barrel, recording the largest weekly increase since 1983.
According to a previous article published by Wall Street News, Goldman Sachs warned that if no resolution signs emerge by the end of this week, oil prices will break the $100 per barrel mark next week; should the disruption of the Strait persist throughout March, prices could surpass the historical peaks of $147 seen in 2008 and 2022.
The strait remains the core issue, while other options have limited marginal impact.
Mike Sommers, CEO of the American Petroleum Institute, stated bluntly, "The real focus must be on reopening the Strait of Hormuz because all other measures, even when combined, cannot provide the stability the global economy requires." He added that other options would only have a "marginal impact on prices."
The Strait of Hormuz is a critical passage for approximately one-fifth of the world’s oil supply. Currently, traffic through the strait has plummeted, with fewer than 50 vessels passing through in the past week, while around 500 oil and gas tankers remain stranded in nearby waters. Shipowners have indicated they will not risk sending vessels through the strait until security guarantees are secured.
Escort services, easing sanctions, increasing production: multiple efforts still fail to address the urgent crisis.
The Trump administration rolled out several emergency measures this week. At the insurance level, the Development Finance Corporation announced a $20 billion reinsurance scheme for transiting oil tankers; however, industry experts questioned whether the institution could provide coverage sufficient to rebuild shipowner confidence.
On the supply side, the U.S. Treasury Department temporarily eased sanctions on Russian crude exports to India on Thursday and hinted at potentially expanding exemptions. Treasury Secretary Bessent stated, "We might lift sanctions on more Russian crude. A significant volume of sanctioned crude is floating at sea, and effectively, by lifting sanctions, the Treasury can create supply."
Moreover, officials mentioned the possibility of an increase in Venezuela's crude oil production. Following the overthrow of the Maduro regime in January this year, the United States has taken over local production operations. However, there remains skepticism in the market about whether the aforementioned measures can form an effective supply in a timely manner.
Strategic petroleum reserves are critically low, significantly narrowing policy buffer space.
Washington’s ability to address this crisis is also constrained by the severe depletion of the Strategic Petroleum Reserve (SPR). In 2022, then-President Biden tapped the reserves extensively to mitigate the oil price surge triggered by the Russia-Ukraine conflict, leading to a substantial decline in inventory. Trump had pledged to replenish the reserves after taking office, but failed to do so last year when oil prices were lower.
Kevin Hassett, Director of the National Economic Council, stated on Friday that utilizing the Strategic Petroleum Reserve is currently not under consideration. Representative August Pfluger, a Republican from West Texas, criticized the depletion, saying it has left the United States "in an extremely vulnerable position."
He told the Financial Times, "I have been warning for years that using the strategic reserve for short-term political purposes undermines long-term energy security. Now, at a time when this emergency buffer is truly needed, reserve levels are far below where they should be. This is a serious national security issue."
Market pressures have reached a critical point, with doubts cast on policy credibility.
Some experts criticized the Trump administration's approach to handling the crisis. Michael Alfaro, Chief Investment Officer of Gallo Partners, an energy and industrial hedge fund, said, "Many policy decisions made or hinted at by the government in the past 48 hours show signs of panic aimed at calming the oil market."
He warned that if signals indicating the imminent reopening of the Strait of Hormuz are not seen by Monday, commodity prices will experience another sharp surge.
However, some have defended the White House strategy. Dan Brouillette, who served as Energy Secretary during Trump's first term, told the Financial Times that the administration holds a longer-term perspective than financial markets. "High oil prices are only temporary. Now is the time to remove this regime and completely end its decades-long extortion over the strait."
Editor/Wendey
