Has the Iran War Produced a Permanent Spike in Energy Pricing?

April 3--As President Donald Trump continues to struggle to find the "exit ramp" for his war against Iran which has proven far more difficult to stop than to start, sources report that there is a growing concern among some of his advisors that the politically damaging spike in energy prices might not fade way with the war's end. In fact, some sources close to the White House believe that war may have in fact been driven more by problems in an unstable trans-Atlantic financial system than regional issues involving Iran, Israel and it ally, the United States.

The near hyperinflating price increases for energy products attributed to the war and the reported closure of the Straits of Hormuz has pushed huge flows of so-called petrodollars into the financial system that was teetering on the edge of a blowout. As one source put it, "it is hard to see London and Wall Street wanting to end these flows."

The question everyone should be asking is not whether the Iran war has “closed” the Strait of Hormuz, but whether it has locked the world into a new, permanently higher energy price regime—one that has almost nothing to do with physical scarcity and everything to do with how oil and gas are priced in a financialized system, and how those flows are used to prop up a failing system; the architecture of the energy market is built to turn every crisis into a profit engine—and this one is perfectly designed for that purpose.

What Really Shut the Gulf

The dominant public narrative is simple: Iran and its proxies attacked tankers, the Strait became too dangerous, and traffic stopped. That story is emotionally satisfying and geopolitically convenient. It is also analytically wrong.

What actually shut down seaborne flows from the Gulf was not missiles, mines, or drones. It was insurance.

Around March 2–3, London‑based maritime insurers and their reinsurers effectively stopped issuing war‑risk coverage for tankers transiting the Gulf and the Strait of Hormuz. Once that happened, lawful commercial traffic didn’t just become “risky”—it became structurally impossible:

• No insurance → no financing. Banks will not finance uninsured voyages.
• No insurance → no chartering. Charterers will not accept uninsured hulls.
• No insurance → no corporate cover. Listed companies cannot justify sailing into a zone where a single incident could wipe out their balance sheet.

The Strait was not physically closed by Iran. It was functionally closed by the withdrawal of insurance capacity in London.

Attacks—roughly a few dozen at most, concentrated early in the conflict—were the trigger to cutoff insurance.

Meanwhile, pipelines kept flowing. Saudi Arabia ramped its East–West line toward 7 mbd. Other regional lines and bypass routes likely bring total non‑Hormuz exports from the Gulf region to around 10 mbd. In other words: the Gulf was never “cut off from the world.” It was re‑routed and partially choked—but not physically strangled.

So, London created the shutdown, not Iran. And it was the vast speculative operations, centered in London, that benefit from the disruption.

The World Is Not Short of Energy

Despite the collapse in seaborne traffic through Hormuz, the world is not in a genuine physical energy crisis:

• The United States is producing at or near record levels and is a major exporter of crude and LNG.
• Russia continues to export large volumes of oil and gas through pipelines, ports, and a shadow fleet that does not depend on Western insurance.
• Brazil, Canada, Norway, West Africa, Kazakhstan, and Guyana are all contributing substantial supply.
• LNG exports from the U.S., Qatar, Australia, and Russia continue to feed global gas markets.

There is no global shortage of oil or natural gas. There is a logistics and risk‑pricing shock centered on one chokepoint, and a financial system that knows how to turn that shock into a pricing bonanza.

Energy Pricing Nothing to Do With Physical Demand and Supply

To understand why prices are behaving as if the world is running dry, you have to leave the world of physical barrels and enter the world of paper barrels.

Since the 1970s, oil has been progressively transformed from a physical commodity into a financial asset class. Its price is now set primarily by the spot markets, the commodities futures markets, options and structured products, Index funds and commodity ETFs, and speculative positioning by banks, hedge funds, and trading houses

While the financial and other press might want you to think that the availability of oil and natural gas drive pricing, that is not the case. It is the perceptions of the various traders and their totes about risk that plays itself out in the interlinked system of speculation, that has become detached from physical reality.

A designer of the modern oil futures market once said, bluntly, that he believed he had created a machine that would generate trillions for speculators and financial predators, while forcing ordinary people to pay for their profits. His one regret: he did not require traders to take physical delivery on their contracts. If he had, Goldman Sachs would have been forced to stack millions of barrels of crude in its headquarters.

By allowing contracts to be cash‑settled and infinitely layered, the system removed the physical constraint that would have kept speculation tethered to reality. Said one source, "oil, now is much more of a financial instrument, than a product or commodity."

Why U.S. Prices Are Soaring Despite U.S. Abundance

The ordinary person—the person Trump is worried about in the coming elections—sees this at the pump.

The United States is no longer dependent on Middle Eastern oil. It has an abundant domestic supply and is a major exporter. Yet U.S. gasoline, diesel, and heating costs are surging as if the country were still hostage to OPEC.

The reason is simple and structural: U.S. prices are tied to global benchmarks (Brent, WTI). Those benchmarks are set in financial markets, not at wellheads. U.S. producers can sell into the global market at global prices. Domestic refiners must pay those global prices to secure crude. Consumers pay the downstream result.

So when a risk premium explodes because London insurers shut down Hormuz traffic, that premium is transmitted directly into U.S. prices—even if U.S. physical supply is untouched.

The U.S. is physically secure but financially exposed.

The Crisis as a Profit Engine

In this architecture, crisis is not an anomaly. It is a revenue model-- and not just for Big Oil.

When a chokepoint like Hormuz is perceived as threatened—even if pipelines keep flowing and global supply remains adequate—the following happens: Volatility increases. Risk premiums expand. Trading volumes surge. Margin requirements rise. Demand for hedging and derivatives spikes. And then most importantly, a tidal wave of petrodollars surges through the system.

Banks, commodity traders, hedge funds, and certain producers make much more money in this environment than in a calm, stable market. In the current case, the bankrupt system needs the petrodollar flows to try to paper over some of its problems. There is no incentive from the financial system to end the crisis—it is to the benefit of London and Wall Street to keep it going as long as possible, even if doing so raises the risk for potential nuclear war. This is a system that monetizes instability.

A Permanent Spike—or a Permanent Regime?

So has the Iran war produced a permanent spike in energy pricing?

In a narrow sense, no: no single war can permanently fix prices at a specific level. Markets move, shocks fade, new events arise. But in a deeper sense, the answer may be yes—because this war has reinforced and exposed a set of structural realities:

• That a single decision by London insurers can effectively “close” a global chokepoint without a single missile being fired.
• That global benchmarks will price in catastrophic risk even when physical supply is adequate.
• That U.S. consumers will pay global crisis prices even when U.S. supply is abundant.
• That the financial system can use energy volatility as a way to push massive flows of petrodollars and speculative capital through a fragile balance sheet architecture.

If those mechanisms remain unchanged, what becomes “permanent” is not a specific price, but a regime:

• A world in which energy prices are chronically elevated relative to physical scarcity.
• A world in which every geopolitical tremor is an opportunity to extract value from households and firms.
• A world in which the most basic input to modern life—energy—is governed less by geology and engineering than by derivatives and insurance committees.

The saner people in the White House, despite what comes out of the mouth of the President, realize that they should have tried to deal with the problem without war. And although they are aware of how the financial system can drive this crisis, they appear to have little stomach for doing battle with London and Wall Street. Trump had at one point said that if London failed to give shippers insurance, he would find a way to do that. He was urged "to stay the f... out of this and was told that if he interfered, the consequences would be severe. So, her did nothing." This and other sources said that Trump might try to pump his way out the oil/gas price problem, if he can find a way out of the war. 

“The Iran war did not prove that the world is short of energy; it proved that the price of energy is controlled by a financial system that profits from crisis, not by the actual availability of oil and gas," said a source. And this system has to change. But who has the guts to do that?"