US Oil Prices Surge Past $80 as Strategic Reserves Hit Four-Decade Low

U.S. oil prices surpassed $80 a barrel on Monday, with West Texas Intermediate crude reaching $81.78 and Brent crude at $87.45. The price increase comes amid diminished expectations for a swift deal to reopen the Strait of Hormuz and the announcement that the U.S. Strategic Petroleum Reserve (SPR) has fallen to its lowest level since 1983.

President Trump's recent remarks have spooked investors who had anticipated a quick resolution between the U.S. and Iran to increase tanker traffic in the Persian Gulf. Instead, the president signaled a preference for a prolonged period of economic pressure on Iran, stating, “We are low-keying it. We are only semi-negotiating with them. We are just watching Iran with its huge inflation and the fact they have no money.”

The Department of Energy announced Monday that the SPR has dipped below 300 million barrels, marking a more than 40-year low. This depletion is occurring as the ongoing conflict fuels significant energy supply disruptions. While U.S. reserves had previously helped mitigate the impact of oil prices that have reached as high as $125 a barrel since the conflict began on February 28, the dwindling supply now raises concerns about further increases in gasoline prices.

The national average for gasoline remained above $4 a gallon as of Monday, according to AAA, over a dollar higher than pre-conflict levels. The Dow Jones Industrial Average saw a slight decline, falling 151 points, or 0.3%, while the S&P 500 and Nasdaq experienced more modest drops.

Investors had been hopeful for a more conclusive U.S.-Iran agreement to ensure the free flow of commerce through the Strait of Hormuz, particularly after last week's cancellation of a planned U.S. attack and assurances of ongoing talks. Treasury Secretary Scott Bessent had previously indicated to CNBC that a deal to restore "freedom of movement" through the waterway could be imminent.

However, no agreement has been reached, and Iran has presented a list of demands. Iran's Foreign Ministry spokesman, Esmaeil Baqaei, stated Monday that the U.S. must end its naval blockade before Tehran would consider reopening the Strait of Hormuz. "As long as the U.S. naval blockade continues, the necessary conditions for the reopening of the Strait of Hormuz do not exist," Baqaei was quoted as saying by the state news agency Tasnim.

Over the weekend, Iran also reportedly demanded that the U.S. lift sanctions, provide reparations for war damages, release frozen Iranian assets, and halt any planned attacks. Last month, a Memorandum of Understanding between the U.S. and Iran to reopen the strait was short-lived, dissolving after Tehran launched attacks on tankers that deviated from their approved routes. The U.S. responded with airstrikes and reinstated its naval blockade.

The SPR, which held approximately 415 million barrels before the conflict, fell to 298.7 million barrels last week. This decrease is attributed to the release of tens of millions of barrels to bolster supply during the Russia-Ukraine war and the subsequent conflict with Iran. The U.S. Government Accountability Office has also issued warnings about the operational integrity of the emergency stockpile due to aging infrastructure.

In March, the International Energy Agency authorized a record release of 400 million barrels of oil to support global supplies. White House officials have consistently stated that oil and gasoline prices are expected to decrease once the conflict concludes.