The Price They Say Is Small
"Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and World, Safety and Peace. Only fools would think differently!"
That's the President of the United States, posting on Truth Social on Sunday evening, as Brent crude breached $100 for the first time since Russia's 2022 invasion of Ukraine.
By Monday morning, Brent had hit $119.50 — up 30% from Friday's close — before pulling back to around $108 on reports that the G7 was discussing emergency reserve releases.
Note what he said. Not "the war." Not "regional stability." The destruction of the Iran nuclear threat. He named the objective. And then he told anyone who objects to $120 oil that they're a fool.
The Production Collapse
While markets processed the price shock, the supply picture got materially worse overnight:
- Iraq's southern oil fields — which produced 4.3 million barrels per day before the war — have collapsed to 1.3 million bpd. A 70% drop. Three million barrels per day gone. Iraq is OPEC's second-largest producer.
- Kuwait announced precautionary production cuts due to Iranian threats against Hormuz shipping. Size unspecified.
- UAE is "carefully managing offshore production levels to address storage requirements" — diplomatic language for: we're cutting because we can't ship.
- Hormuz remains effectively closed. 150+ tankers anchored outside the strait.
My March 2 prediction that Saudi and Gulf oil output would drop by at least 2 million bpd within a week was conservative. Iraq alone lost 3 million. The total Gulf production disruption is likely north of 5 million bpd — roughly 5% of global supply.
The Contagion
This is no longer just an oil story. Monday brought:
- European natural gas prices surged 30%, per Bloomberg. Qatar is a major LNG supplier. Its facilities are under missile attack.
- Asian stock markets plunged across the board.
- US crude futures posted their largest weekly gain in trading history — surpassing anything seen in the 1973 embargo, the 1990 Gulf War, or 2022.
The G7 finance ministers are scheduled to call at 8:30 AM Eastern to discuss a coordinated strategic petroleum reserve release. The last time the G7 tapped reserves was 2022, when Russia invaded Ukraine and Brent briefly touched $130. We're approaching that territory on Day 10 of a war whose president calls the economic pain "very small."
What the SPR Can and Can't Do
Strategic reserves can smooth panic. They cannot replace structural supply loss. The US SPR holds roughly 390 million barrels — down from 638 million before Biden's 2022 release. At 5 million bpd of lost Gulf production, global reserves buy time in weeks, not months.
If the war ends quickly and Hormuz reopens, a coordinated SPR release calms markets and covers the gap. If the war doesn't end quickly — and nothing about Trump's "unconditional surrender" rhetoric suggests it will — the reserves are a finger in a dam.
The Nuclear Tell
Bury this in Trump's Truth Social rhetoric at your peril: he explicitly named the destruction of Iran's nuclear capability as the objective for which oil prices are a "small price." This is the clearest signal yet that strikes on nuclear facilities — Natanz, Fordow, Isfahan — are imminent or already planned.
My March 6 prediction of strikes on at least one Iranian nuclear facility before March 12 just got stronger. The president isn't framing oil costs as the price of degrading Iran's conventional military. He's framing them as the price of eliminating Iran's nuclear program. You don't say that unless the strikes are coming.
Ten days ago, a barrel of oil cost $77. Today it briefly touched $120. European gas is up 30%. Asian markets are crashing. Iraq's oil production has collapsed. And the president says this is a small price. The question isn't whether he's right. The question is: small compared to what comes next.