The conflict in Iran led to few, if any, ships passing through the Strait of Hormuz. Insurance companies refused to provide insurance underwriting for ships. That caused a sudden shortage in oil shipments. WTI crude prices jumped to around $100/bbl over the past weekend.
Pundits and the media declared that oil would reach $130/bbl to $200/bbl next. After one post from President Trump suggesting that the conflict was moderating, WTI crude closed at around $86.
Is the oil boom already a bust? The oil sector is unlikely to return to the boom times, where demand would continue to outstrip supply. Saudi Arabia and other nations would likely increase production once passage through the Strait became safe again.
Energy stocks have already rallied since last December. Occidental Petroleum (OXY), for example, is up by 29% YTD. Devon Energy (DVN) gained 19% in 2026.
The plunge in oil prices on Tuesday is a magnitude not seen in four years. Rumors circulated that the U.S. escorted an oil tanker through the Strait. The White House denied that story.
People might assume that the U.S. military dominance gives the country an advantage. However, expect Iran to use whatever means it has to disrupt the global economy. The U.S. does not have many actions it could take to guarantee ship safety through the Strait.
Watch the U.S. bond market. The TLT ETF fell by 1.3% in the last week, while the U.S. Dollar Index (UUP) rally started to lose momentum.
