The US administration will start rolling out measures on Tuesday to mitigate impacts of disruption in crude and LNG flow out of the Mideast Gulf, US secretary of state Marco Rubio said on Monday.
But the administration is not considering a drawdown of strategic oil stocks at this time, according to a source familiar with the administration's thinking.
"There is a plan in place. We anticipated this could be an issue," Rubio told reporters. US treasury secretary Scott Bessent and US energy secretary Chris Wright "will begin to roll out those steps starting tomorrow to mitigate against the impact that could have", said Rubio, after briefing congressional leaders on the US-Israeli attack on Iran.
The US Strategic Petroleum Reserve (SPR), which consists of four storage sites in Texas and Louisiana, held 415.4mn bl of crude in storage as of last week. Under existing law, President Donald Trump can order an emergency drawdown from the SPR if he finds there has been a "severe increase" in oil prices that could cause major harm to the economy. Trump had been critical of former president Joe Biden for ordering such a drawdown in 2022 when oil prices spiked after Russia invaded Ukraine.
Shipping through the strait of Hormuz halted over the weekend, after the US and Israel launched their attack on Iran. Iran has retaliated primarily by targeting ships, port infrastructure, airports and energy installations in the Mideast Gulf. QatarEnergy announced on Monday that it would halt all LNG production following a drone strike at the Ras Laffan facility, while the shut-in of Israeli gas production led Egypt to issue a short-term LNG supply tender. State-controlled Saudi Aramco said it shut its 550,000 b/d Ras Tanura refinery on Saudi Arabia's east coast after it was struck by debris from intercepted Iranian drones early on Monday.
The front month Nymex WTI crude contract was up by more than 5pc on Monday.
"Obviously, markets are going to be reacting to news about what's happening," Rubio said.
Trump told CNN earlier on Monday that Iran's retaliatory attacks against its Mideast Gulf neighbors came as a surprise to him.
Trump said on 27 February — while flying to Corpus Christi, Texas, for an event to tout US oil and gas production growth — that he was not concerned about the risk of higher oil prices in case of strikes on Iran. Trump gave the order to commence the attack against Iran while en route to Texas that day, Joint Chiefs of Staff chairman, General Dan Caine said on Monday.
Rubio downplayed the potential for lasting disruption to energy flows through the strait of Hormuz because, he said, the US military has destroyed much of the Iranian navy.
Shippers held back from transiting Hormuz not only in response to the Iranian attacks on ships but also because insurance companies began pulling coverage from vessels transiting the strait and raising additional war risk premiums on vessels.
The Houthi movement in Yemen severely constrained commercial shipping through the Red Sea in 2023-24 by carrying out dozens of drone and missile attacks on ships transiting the waterway.
Rubio in remarks to reporters on Monday offered another explanation for the US decision to attack Iran. Israel was going to attack Iran in any case, so the US opted to join the attack "because we knew that would precipitate an attack against American forces, and we knew that if we didn't preemptively go after them before they launched those attacks, we would suffer higher casualties", Rubio said.
Trump justified the attack on Iran by citing an imminent threat from Tehran to the US and also cast it as retribution for Iranian actions against the US since the establishment of the Islamic Republic in 1979.
