(The Center Square) – After oil futures hit $119 a barrel Sunday night before dropping to $100 on Monday morning in response to a likely prolonged conflict with Iran, the stock market sank.
As gas prices and other associated costs keep climbing, Texas oil and natural gas industry leaders weighed in on the short- and long-term implications.
On Monday, the Dow Jones, S&P 500 and Nasdaq Composite all reported losses as the market opened, with steep losses reported throughout the day. West Texas Intermediate and Brent crude futures were trading at $94.85 and $96, respectively, for most of the day. By the market’s close, they’d dropped to $86 and $89, respectively.
“US stocks recovered from steep losses … flipping firmly into the green” after President Donald Trump said the U.S.-Israel-Iran conflict could be over soon, according to several news reports. All three indexes, Dow Jones, S&P 500 and Nasdaq Composite, reported gains by the closing bell.
This was after on Sunday night, Trump said increased prices at the pump were a “small price” Americans should be willing to pay. Meanwhile, OPEC+ countries are producing significantly less crude and major shipping companies are rerouting cargo as their insurance policies have been canceled or increased by 50%, The Center Square reported.
“The psychological level of $100 oil was just a short-term price target on its way to higher levels as the conflict drags on, oil production is throttled back as oil storage fills up because tankers are unable to load. Saudi Arabia, Kuwait, UAE, and Iraq have cut oil production,” Andy Lipow with Houston-based Lipow Oil Associates told The Center Square. “With each passing day, refineries, especially in Asia, are beginning to reduce their utilization rates due to the lack of Middle Eastern crude oil, further exacerbating the supply shortfall as Middle East refineries are unable to export gasoline, diesel, and other refined products.”
He also notes that the Saudi Ras Tanura refinery, which produces 550,000 barrels per day is shut down. Bahrain’s Sitra refinery, which produces 400,000 bpd, was hit on Monday, forcing it to halt operations. Qatar’s liquified natural gas production may be offline for several weeks, he adds.
The conflict is also impacting Asian markets. “What is particularly concerning is if other countries, such as Japan and Korea follow China’s and Thailand’s lead in restricting refined product exports and a hoarding mentality sets in as politicians order builds in gasoline, diesel, and jet fuel inventory to ensure their own domestic supply,” Lipow said.
U.S. producers, led by Texas, are already exporting record amounts of LNG and need export facilities that are currently under construction to come online to increase supply to the market, he added. “With no readily available alternatives, Europe is in an especially dire situation as they have been eliminating all Russian natural gas imports,” he said.
When European countries were in dire straits in 2022, it was Texas LNG exports that helped keep their heat and lights on, The Center Square reported.
“Geopolitical conflicts highlight how sensitive global energy markets are to disruptions in key producing regions. The conflict in the Middle East is a clear testament to Texas’ essential role in supporting U.S. energy security and global energy stability. Elevated prices driven by supply risks could eventually encourage increased output and exports, but that will depend on how long the geopolitical risk premium persists,” Ed Longanecker, president of Texas Independent Producers and Royalty Owners Association (TIPRO), told The Center Square.
“Texas operators remain cautious and attentive to the uncertainties associated with prolonged geopolitical tensions and their broader economic and operational implications. Production cannot instantly ramp up in response to short-term market shocks and companies are unlikely to make significant changes to capex or production plans in the near term. What moments like this reinforce is the importance of maintaining a strong domestic energy sector and policies that support continued investment, production, and exports from the United States, especially from Texas. Once tensions ease, the premium should unwind quickly.”
Todd Staples, president of the Texas Oil & Gas Association, agreed, telling The Center Square, “Periods of geopolitical tension underscore why American energy leadership matters. Texas producers supply reliable energy that supports our economy, strengthens our national security, and helps stabilize global markets when disruptions occur elsewhere.
“While short-term price volatility does not automatically translate into immediate production increases, sustained higher global prices generally strengthen investment conditions in the Permian Basin and across Texas, supporting export activity, refinery utilization, LNG shipments, and local economic benefits over time. Energy security is national security, and the United States, led by Texas, has the resources, technology, and infrastructure to continue meeting growing energy demand at home and abroad.”
A TIPRO analysis of market trends and industry data prior to the conflict indicated “continued challenges for domestic producers,” The Center Square reported.
The Texas industry remains optimistic but argues statutory changes are needed to ensure reliability and secure long-term investment in domestic production.
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