Does it make any sense for Saudis to try increase pumping of oil from the ground when transportation of oil is blocked by events around Iran?
No, it doesn’t make strategic sense for Saudi Arabia to increase oil pumping from the ground during a blockade of the Strait of Hormuz, at least not as a solution to increase total exports. Instead, this move serves as a "swing producer" theater strategy pretending to maintain market share, testing capacity, preparing for alternative, non-Gulf routes, and keeping Trump happy.
While a blockade by Iran stops or hampers ~20 million barrels per day (mb/d) of normal flow, the Saudis aim to:
Utilize Alternative Routes: Saudi Arabia has the East-West pipeline (Petroline) that connects the Eastern province to the Red Sea, allowing them to bypass the Strait of Hormuz, albeit with limited capacity.
Show Reliability: Increasing output reinforces its position as a "reliable supplier" to key customers, particularly in Asia, who might otherwise turn to other suppliers.
Prepare for Reopening: High production ensures that once a diplomatic solution is reached or alternative, safer routes are secured, they are immediately ready to flood the market.
Capitalize on Higher Prices: Even if volumes are reduced, the resulting oil price spikes (potentially to $120+ per barrel) ensure that increased, yet limited, exports still generate high revenue.
The Practical Limitations
However, this strategy is limited because the alternative pipelines cannot fully compensate for the total closure of the Strait of Hormuz, as only a fraction of the usual daily volume can be redirected. The vast majority of Gulf output would remain trapped behind the blockade. Therefore, the increase in production is primarily a contingency plan and a show of strength, rather than a practical method to deliver all of their usual cargo.
Therefore:
“Oil prices surged Sunday after the U.S. and Israel traded deadly blows with Iran across the Middle East, leaving Wall Street bracing for the economic fallout of an extended regional war.
Benchmark U.S. crude futures rose as much as 11%, trading as high as $75 a barrel, before retreating to about $70 at 10 p.m. Eastern time. Brent futures, the global price gauge were up about 5% to roughly $76 a barrel. Futures tied to the S&P 500 were down less than 1%. Changes in stock futures don't always reflect market moves after the opening bell. In Asia early Monday, Japanese stocks were down 1.5% at the midday break in Tokyo, while Hong Kong's Hang Seng Index was off more than 2%.
Tit-for-tat strikes in recent days have thrust one of the world's key chokepoints for energy into the crossfire. As tanker operators scrambled for safety, momentarily snarling supplies of oil, natural gas and more, traders have waded into the fog of war across live social-media feeds and TV coverage.
Iranian officials and media in recent days have shared conflicting statements about whether Tehran intends to stymie sea traffic through the Strait of Hormuz, a tactic that analysts say is likely designed to sow confusion.
While there haven't been concerted attacks on energy infrastructure so far, tanker-tracking firms say many companies have avoided traversing the narrow shipping route out of caution.
"The Iranians understand that the key sensitivity to the U.S. is the price of oil. They're trying to increase the price," said Gregory Brew, a senior analyst at the Eurasia Group.
"What they're trying to do right now is create uncertainty about the safety of the waterway," added Brew, an Iran specialist. "They want to maintain space up the escalatory ladder. They're not going 100% immediately."
Now, the killing of Iranian Supreme Leader Ayatollah Ali Khamenei and the deaths of U.S. servicemembers are pushing the conflict into a perilous new phase.
Investors and politicians view a forced closure of the strait by Tehran as a scorched-earth tactic that would draw a furious military response.
Even so, analysts at Barclays believe a prolonged conflict could put $100-a-barrel oil in play.
That type of price jump would push up the cost of fuel for cars, power plants and more the world over, rippling through the broader economy and markets. In a sign that investors are searching for safety, gold futures on Sunday climbed more than 2%.
"For equities and credit the impact [of the war] is negative, but only a severe and sustained oil disruption would imply substantial consequences for global growth," Goldman Sachs analysts wrote Sunday. "We expect cyclical sectors and oil importers -- some of which have had strong starts to the year and may face vulnerability from positioning adjustments -- will likely see pressure unless a resolution occurs quickly."
For weeks, as Washington massed forces in and around the Middle East, traders snapped up oil futures for fear of a conflict that could disrupt a roughly 6-mile-wide shipping route through which roughly one-fifth of global oil and natural gas travel.
Benchmark U.S. prices as of Friday had already jumped 20% from their early January lows.
That type of increase has been normal when tensions flared with Tehran in recent years. But the tankers hauling oil and fuel through the Strait of Hormuz have never been disrupted at length.
Even last year, when Iranian officials reportedly threatened to choke off shipments through the waterway during a 12-day war between Iran and the U.S. and Israel, crude prices quickly retreated after the dust from the conflict had settled.
But the speed and severity of strikes by Israeli and American forces in recent days, as well as Iranian counterattacks on energy-export powerhouses lining the Persian Gulf, took some analysts by surprise.
President Trump's stated goal for regime change in the Islamic Republic has upped the ante.
ClearView Energy Partners opened a missive to clients this weekend with an ominous warning: This time could be different.
"[C]ivil strife in the wake of regime change also threatens to introduce chronic risk -- inside Iran, and regionally -- as factions jockey for power," the analysts said. "In short, crude price premia could persist beyond the end of Israeli and U.S. combat operations."
Oil prices' recent climb suggests some wartime risks have already been priced in. Now, "the key question is when do vessels re-establish export flows," said Alan Gelder, senior vice president of refining, chemicals and oil markets at energy consultant Wood Mackenzie.
Gelder added that a full resumption of shipments from countries including Iran, Saudi Arabia, Kuwait and Iraq could take weeks, even in an optimistic scenario in which Tehran agrees to cooperate with Washington's demands over its nuclear program.
"During that time, oil prices are heavily risked to the upside," Gelder said. Analysts say a sustained disruption of Qatari natural gas could similarly boost prices for the heating and power-generation fuel.
Should the worst-case scenarios play out, Americans could face higher prices at the pump heading toward midterm elections, pressuring President Trump's affordability push.
But the energy-hungry economies of Asia and Europe could pay an even steeper cost.
In a note to clients Sunday, Evercore analysts said a weekslong oil-price run-up to roughly $80 or $85 a barrel "would leave only a small impact on the global economy and very little on the U.S."
The impacts would snowball with a more sustained or severe move.
"The risk case of $100-120 oil is in our mind qualitatively different," Evercore wrote. "The price shock would be much more material, raising risks to inflation expectations."” [1]
Could inflation expectations relating to events around Iran take away the power from Trump's Republicans in Congress during November elections?
Based on early 2026 reports, escalating tensions and military actions involving Iran, such as "Operation Epic Fury" are creating significant economic and political risks that could diminish the power of Donald Trump's Republicans in Congress during the November elections. Inflationary pressures stemming from higher oil prices, coupled with voter concern over foreign conflicts, are testing the unity of the MAGA base and threatening to erode support in competitive districts.
Impact on Inflation and the Economy
Rising Energy Costs: Analysts warn that conflict with Iran could surge oil prices, with potential for oil to reach $120 a barrel, driving U.S. inflation (CPI) up to 5%. This could reverse recent progress on inflation and hike gasoline prices just as economic anxiety takes center stage in midterm campaigns.
Supply Chain Disruptions: Conflicts in the Middle East have already affected global shipping, with major carriers suspending transits through the Strait of Hormuz, threatening to raise the cost of consumer goods.
Fed Policy Tightening: Persistently high inflation driven by this conflict could force the Federal Reserve to reconsider rate cuts, acting as a further drag on the economy.
Impact on Republican Election Prospects
Shift in Voter Priorities: While Republicans are defending their control of the House and Senate, polls show voter frustration with the cost of living and a preference for economic focus over foreign"forever" wars.
Erosion of Working-Class Support: Persistent inflation, now exacerbated by the conflict, makes the economy a liability for the GOP, potentially weakening their standing with working-class voters.
Internal Rifts: The focus on military action has created a rift among some supporters, with some MAGA-aligned figures questioning whether the strikes align with promises to prioritize domestic issues.
Direct Electoral Risk: White House officials have reportedly expressed concern that a prolonged engagement, combined with rising fuel costs, could cause them to lose their slim majority in the House of Representatives.
While some within the administration may hope a strong military stance boosts Trump's image as a commander-in-chief, the prevailing risks of a prolonged, costly conflict appear more likely to damage Republican prospects by exacerbating the economic pain voters are already feeling.
1. Wall Street Readies for Impact, As Oil Climbs, Futures Fall. Uberti, David. Wall Street Journal, Eastern edition; New York, N.Y.. 02 Mar 2026: A1.
