President Trump warned oil-producing nations on Monday to keep prices down and ordered his team to increase domestic production immediately, as the world braced for economic fallout from the U.S. bombing of Iran’s nuclear sites.
While Wall Street had a muted reaction to the conflict, and oil prices remained steady, Mr. Trump said he is watching for price shocks tied to his strikes and Tehran’s retaliation.
“Everyone, keep oil prices down. I’m watching! You’re playing right into the hands of the enemy. Don’t do it!” Mr. Trump posted in all caps on Truth Social.
Iran may attempt to choke off the Strait of Hormuz to the south of its country, a channel through which a quarter of the world’s oil supply moves. It could lay mines in the strait, sparking an increase in oil costs.
“The Iranian regime’s No. 1 goal is to stay in power,” said Ryan Young, a senior economist at the Competitive Enterprise Institute, a free-enterprise think tank. “If it thinks disrupting oil supplies and shipping will help it stay in power, then it will disrupt them. If it thinks those disruptions would upset its allies more than it will help, it will minimize them.”
U.K. Maritime Trade Operations, which issues reports on the maritime situation in the region, said there is no indication that Iran will target commercial shipping, but the threat level remains elevated.
“Full Iranian retaliation remains uncertain. Blocking the Strait of Hormuz being the most discussed option, which would have severe consequences for shipping,” the UKMTO wrote Monday in an advisory note.
The note said some vessels are reporting electronic interference that affects navigation systems, and some vessels are choosing to travel through the strait only during daylight.
Mr. Trump campaigned last year on a promise to tap more robustly into U.S. oil fields and bring energy costs down. He said once that happened, inflation in general would come down as companies saved money along the supply chain.
Hoping to keep crude flowing, the president on Monday said he ordered the Department of Energy to “DRILL BABY DRILL!!!”
“And I mean NOW!!!” Mr. Trump said.
U.S. oil production stood at 418 million barrels in March, the most recent statistic from the U.S. Energy Information Administration. The U.S. produced 407 million barrels in January and 370 million barrels in February.
Mr. Trump on Saturday ordered the bombing of three nuclear sites in Iran, an oil-rich nation, hoping to end a conflict with Israel and take the Islamic Republic’s nuclear capabilities off the table.
So far, oil prices haven’t seen widespread shocks, as investors hope for a gradual de-escalation in the conflict.
“I think we’re in such a good position today. This American energy dominance that President Trump ran on, we’re at record high production of oil today, record high production of natural gas,” Energy Secretary Chris Wright told CNBC. “We’ve got friendly, close communication relationships with our other major energy-producing nations, and we’re standing strong against the one and only one major destabilizing force in the Middle East.”
Iran fired missiles Monday at a U.S. military base in Qatar in retaliation for Saturday’s bombing. The missiles were intercepted and resulted in no casualties.
Prices for U.S. crude oil and the global crude benchmark, Brent, were both down over 7% after the missile launches, a sign that traders saw the retaliation as restrained.
Wall Street took the situation in stride, with major indexes trading in positive territory to start the week.
The Dow Jones Industrial Average jumped 375 points, or 0.89%, while the S&P 500 and Nasdaq rose 0.96% and 0.94%.
Stocks have been on an up-and-down cycle for weeks as traders await the results of trade negotiations between the U.S. and countries facing hefty tariffs if they don’t reduce trade barriers on American goods by a July 8 deadline.
The Iran conflict threatens to overshadow Mr. Trump’s intensive trade plans, which dominated the first months of his presidency. Already, he had to depart early from the trade-heavy Group of Seven nations summit in Canada because of the Iran-Israel conflict.
“I think all of this complicates trade negotiations moving forward. Trade issues will be secondary,” said Clark Packard, senior fellow in trade policy at the libertarian Cato Institute.
The Trump administration is seeking Beijing’s help in keeping shipping lanes open, potentially providing China with leverage in trade negotiations.
“I encourage the Chinese government in Beijing to call them about that because they heavily depend on the Straits of Hormuz for their oil,” Secretary of State Marco Rubio said during an interview on Fox News.
On the flip side, analysts said Mr. Trump considers trade far too important to let it fall by the wayside.
“If the conflict persists,” Mr. Young said, “he might use tariffs as a foreign policy tool to cajole allies and threaten opponents.”
A White House official told The Washington Times the Iran conflict would not affect trade negotiations.
The official said the administration is making progress on new deals, including with Israel, and that it’s demonstrated it can walk and chew gum by juggling trade with the Ukraine-Russia conflict, congressional work on tax-and-spending legislation and other matters.
The official also said the U.S. did not consider the G7 to be a “breakthrough” session for trade deals, so Mr. Trump’s early departure would not doom any deals.
