While President Donald Trump met Tuesday in the Situation Room to discuss a possible attack on Iran, global energy leaders at a conference just one mile away were fixated on something very unusual in the oil markets: relative calm.
Since Israel launched its attacks on Iran last week, oil prices haven’t increased more than 8% on any given day. That’s a huge divergence from the energy market’s usual reaction in the face of a potentially massive, disruptive, Middle East conflict: During the 1973 oil embargo, prices tripled; during the Gulf War, they doubled.
But oil markets are not so simple anymore. Unless Iran takes direct and aggressive action against major energy targets, the world’s current robust and diverse sources of oil, combined with somewhat low demand, can withstand a Middle East conflict, industry experts said to each other and to NOTUS at the Atlantic Council’s Global Energy Forum on Tuesday.
At the forum (which usually takes place in the United Arab Emirates), representatives from the UAE, Saudi Arabia and major U.S. oil companies mingled with former diplomats and broke from their scheduled conversations on artificial intelligence to talk about Iran and geopolitics instead.
Energy Secretary Chris Wright — who had been scheduled to speak on more mundane energy topics — was called to the White House and replaced with Biden administration Middle East policy adviser Brett McGurk, who was bullish about the United States entering the war.
McGurk told the crowd that there were only two likely possibilities for the next moves in the Israel–Iran conflict: Iran finally agreeing to a deal to disable its nuclear enrichment capability at the underground Fordo facility, or President Trump using a massive bomb to destroy it.
“Right now, this crisis can end if Iran accepts the deal on the table,” McGurk said. “Given where we are, the worst case here would be to leave Iran with that Fordo … intact. So it’s a deal, or it’s a military strike.”
Amos Hochstein, another key Biden administration Middle East negotiator, said the same when he was asked to predict what would happen with Iran at the beginning of a panel ostensibly about AI.
“Does Fordo get dismantled through an ordinance from the United States, or does it get dismantled through diplomacy? That’s the only question I see that remains, and that’s the option on the table,” he said.
Both McGurk and Hochstein were reportedly hawkish toward Iran during the Biden administration, supporting Israel’s attacks on Hezbollah as a way to weaken the country.
But even the U.S. employing massive bunker-busting bombs on the Fordo site would not necessarily mean serious consequences for energy prices, analysts said.
“If it goes diplomacy, then the markets, you may even see a massive drop in prices,” Hochstein said. “But if it goes to escalation, even then, it would depend on what the reaction of the regime is,” he added, explaining that Iran would have to want to continue fighting.
“The president will use every tool to ensure the price of energy in the U.S. remains stable,” a White House administration official said.
Iran would need to do something catastrophic to its own energy industry — like block the crucial shipping route through the Strait of Hormuz — to create the shortage fears that would spike oil prices above $100 a barrel and force the United States to release oil from the Strategic Petroleum Reserve, David Goldwyn, who served in key Middle East energy policy roles during the Obama administration, told NOTUS.
The Iranian government knows that such a move would also enrage China, which depends heavily on cheap Iranian oil imports, he added.
The U.S. petroleum reserves still remains only about halfway full after significant sales the Biden administration made at the beginning of the Ukraine war and from those mandated by Congress — but that should still be more than enough supply to meet the moment of a major disruption, Goldwyn and Joe Webster, an Atlantic Council fellow, both said.
The White House says there have been no discussions about having to tap into the reserves.
Historically, even the possibility of conflict has been enough to induce panic in the oil markets.
But even that isn’t happening now — because investors were burned for overreacting to the supply disruptions at the beginning of the Russia–Ukraine war, said Helima Croft, the global head of commodity strategy at RBC Capital Markets, during the panel with McGurk.
“The risk isn’t zero,” she said. “I think the message, or the takeaway from many market participants is, call me when there is a disruption. Tell me there’s a lot of risk, but I’m waiting to see it materialize.”
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Anna Kramer is a reporter at NOTUS. Violet Jira, a NOTUS reporter and an Allbritton Journalism Institute fellow, contributed to this report.