Oil Surges to $91 Amid Mideast Conflict
Oil prices have surged to $91/barrel amid escalating military conflict between Iran and Israel, with Qatar's energy minister warning prices could hit $150 in weeks. The disruption is hitting consumers directly, as U.S. gasoline prices jumped 34 cents last week alone. Meanwhile, Kuwait is slashing output due to full storage, compounding supply fears.
The last time Brent crude, the international benchmark, topped $91 a barrel was in April 2024. The all-time high for Brent was $147.50 in July 2008, while the U.S. benchmark, WTI, hit its record of $147.27 the same month. The recent surge represents the largest weekly percentage jump on record for oil prices. A key factor in managing price shocks is the U.S. Strategic Petroleum Reserve (SPR), the world's largest emergency supply. Following a historic 180-million-barrel drawdown in 2022, the reserve is at its lowest level in 40 years. As of February 2026, the SPR held about 415.4 million barrels, which is approximately 58% of its 714 million barrel authorized capacity. Globally, the OPEC+ alliance, which includes Saudi Arabia and Russia, has been managing supply through production cuts. These nations have different fiscal needs; Saudi Arabia's break-even oil price to fund its budget is estimated to be around $81-$85 per barrel, while Russia's is projected to be lower, around $77 per barrel by 2025. These figures influence their willingness to adjust output. While international supply is a concern, U.S. oil production has been hitting record highs, reaching over 13 million barrels per day in 2024. Texas and New Mexico are the dominant producers, accounting for more oil than the rest of the country combined. This domestic production provides a buffer but doesn't fully insulate the U.S. from global price shocks. The current conflict is centered around the Strait of Hormuz, a critical chokepoint for global energy trade. Roughly 20% of the world's daily oil supply passes through this narrow waterway, and the disruption has effectively halted most of that traffic, removing an estimated 7-11 million barrels per day from the market. Economists are now watching for the broader impact on inflation and economic growth. A sustained $10-per-barrel increase in oil prices is estimated to reduce U.S. economic growth by about 0.1 percentage point. While some analysts fear a return to 1970s-style stagflation, others argue the demand destruction caused by high prices could ultimately lead to disinflation.
