Crude Oil Prices Stymie Trump’s TACO Trade Potential
Oil futures continue to bet on a quick end to the Middle East fighting and a reopening of the Strait of Hormuz. Markets are pricing that outcome despite mounting physical supply losses.
Market moves and price context
Brent futures traded near $111.81 a barrel in early Asian trade on Monday. That level is 54% higher than the $72.48 close recorded on February 27.
February 27 was the day before the U.S. and Israel launched aerial strikes against Iran. By comparison, Brent peaked at $139.13 during the 2022 Russian invasion of Ukraine.
How much oil is at risk
The Strait of Hormuz normally transits about 20 million barrels per day. Current disruptions have removed a large share of those flows from the market.
Even with extra shipments from Saudi Arabia’s Yanbu and the UAE’s Fujairah, analysts estimate a supply shortfall near 12 million barrels per day. That equates to roughly a 10% shock to global crude and products.
Refined products under strain
Physical fuels are already feeling pressure across Asia. Singapore jet fuel touched a record $225.62 a barrel on March 19.
That price more than doubled from $93.45 on February 27. For context, the jet-fuel surge after Moscow’s attack in 2022 reached $173.69 at peak.
Temporary fixes and the central choke point
Releases from IEA stockpiles and U.S. waivers on Russian and Iranian shipments provide short relief. They do not remove the structural problem.
The single decisive factor is the Strait of Hormuz. The longer the waterway remains constrained, the greater the pressure on supplies.
Political dynamics shaping the outcome
U.S. President Donald Trump has sent mixed signals in recent weeks. He has alternated between forecasting a swift end and threatening to “obliterate” Iran’s energy sites.
The market nickname TACO stands for “Trump Always Chickens Out.” Rising crude oil prices have helped stymie Trump’s TACO trade potential by reducing urgent pressure to secure a rapid settlement.
Positions of key actors
Israel appears intent on neutralising perceived Iranian threats. Iran may see value in prolonging the conflict to gain leverage.
Russia benefits economically from higher energy prices. China relies on large crude stocks but could still suffer from extended disruptions.
Economic fallout and global risks
A sustained loss of about 10 million barrels per day would mirror the scale of demand collapse seen at COVID-19’s peak. The difference now is that the problem is supply-driven.
Economic pain will be uneven. Asia and Africa face particular vulnerability, while many richer nations lack fiscal room to blunt an energy-led inflation shock.
This analysis was contributed by Clyde Russell, Asia Commodities and Energy Columnist at Filmogaz.com. He has covered commodities and conflicts for four decades and splits his time between Tasmania and Asia.
