Iran war energy crisis – it’s only half time

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A blog by Martin Erasmuson.

So the Iran/US war is over, we’re heading back to normal and I overreacted with my doom-and-gloom posts. I really do wish that were true, but regrettably, we’re only at the end of the beginning of the tectonic shift that is happening in the Middle East, and in the short-term, the global economy market is set to get much worse.  Here’s why……

Basically, Donald Trump is manipulating the US domestic oil market (and with it, the global market) to forestall an energy crisis; which would lead to soaring fuel prices at US gas stations, that in turn would lead to a republican trouncing in the November 2026 US mid-term elections; which in turn would end his dictatorship and likely lead to his impeachment in a Democrat-led Congress.

Enter the US Strategic Petroleum Reserve (SPR)

The SPR was established on December 22, 1975 by US President Gerald Ford as an emergency stockpile in response to the 1973–1974 Arab oil embargo. At it’s peak the SPR stood at around 700 million barrels but in recent years, back-to-back conflicts starting with the 2022 Russian special military operation in Ukraine, then the 2026 US/Israel/Iran war have seen the reserve decline drastically.

Prior to the February 2026 attack on Iran by the US and Israel, around 20% of global oil (20 million barrels daily) passed through the Strait of Hormuz.   When Iran closed The Strait, cutting off that energy lifeline, markets quickly responded.  Thus the higher fuel prices. Under pressure at home, Trump almost immediately began drawing down the SPR to buffer against higher energy prices, particularly petrol (gasoline), diesel and aviation-fuel).  In just four months (February – June 2026) the SPR was down 75 million barrels, or 18% of its pre-war high in late February 2026.

 A standard Google search suggests at the current rate of drawdown, the SPR would last about 8.5 months (roughly 260 days), or (as of writing) well into 2027. But as University of Chicago Professor Robert Pape points out, because much of the SPR is stored in salt caverns (no I’m not making that up), the effective capacity is significantly less. This is why Trump was desperate to resolve the conflict with Iran.  He can bluster all he wants, but the clock is ticking, and the US mid-term elections are looming.

Thanks Raz I hear you say, but we’ve got a peace deal in place and everything will soon be ‘back to normal’.  Indeed, as of writing, oil prices are falling, along with fuel prices at the pump. Yes oil ‘futures’ oil prices have dropped.  But there are multiple accusations that Trump is gaming the system, mostly to fill his back pocket, but also the keep the price at the pump down.

The other red-flag is the so-called US/Iran memorandum of understanding (MOU - no it’s not a peace deal).  Amounting to 13 points, key among them include:

  • [Iran and the US] and their allies in the current war (i.e. Israel), [ ] declare the immediate and permanent termination of military operations on all fronts, including in Lebanon.

  • The US and allies establish a US$ 300 Billion fund for the reconstruction and economic development of Iran.

  • The termination of all types of sanctions against Iran.

  • Permanent waivers (approval) for the export of Iranian crude oil and petroleum products

  • The release of frozen Iranian funds and assets (around US$100B).

Again, no one would be more please than I if all that happens and the US, Israel and Iran sign a permanent peace agreement based on the above, agreed by the UN General Assembly and endorsed by the UN Security Council.   But given Israel’s and the US’s extensive track record in duplicity against Iran, does anyone really believe any of that has a snowball’s chance in hell of happening by August 16 2026; if at all? Come the 17th August 2026 (if not before), the shooting will likely resume; the Strait of Hormuz will be closed again; and oil prices will go even higher.