The US-Israel attack on Iran lobs a grenade into the hydrocarbons outlook: Nothing could change, or forecasts could shatter as once-unthinkable tail risks grow more probable in the weeks ahead. East Daley Analytics’ current view is that turmoil in the Middle East will have little impact on the trajectory of US supply, though it does open profit opportunities on several fronts.
Those opportunities are rooted in the shocking price volatility resulting from the regional chaos. Crude oil jumped 35% last week, and global gas prices spiked after the US and Israel launched joint strikes against Iran over the weekend, killing the country’s supreme leader, Ayatollah Ali Khamenei. Iran retaliated with a wave of drone and missile attacks targeting 12 countries across the region.
The WTI front month soared to a high of $119.48/bbl in trading Monday morning (March 9) before reversing course midday to settle at $85.08. WTI ended Friday (March 6) at $90.90, a $24 gain on the week. European gas prices surged up to 70% midweek, and LNG spot prices increased 96% as fighting intensified.
Several events could inflame energy markets:
- QatarEnergy declared a force majeure at the Ras Laffan LNG complex, the world’s largest, following a drone attack by Iran. Qatar supplies ~20% of the world’s LNG and is the largest supplier to China. There is no timeline for a restart.
- The Strait of Hormuz has been effectively shut to tanker traffic. Iran’s Revolutionary Guard declared the strait closed to ships from the US, Europe and Israel, and has struck at least four tankers with drones and missiles. Roughly 20 MMb/d of crude oil passes through the Strait of Hormuz, plus Qatar’s LNG output and LPG cargoes from several Middle East exporters.
Despite these events, East Daley maintains a stay-the-course view based on constraints in the US market. Higher prices should prompt a supply response, but several bottlenecks prevent this.
- The Permian Basin, the largest potential source of new crude oil, is constrained on natural gas takeaway. Waha hub prices have been trading in negative territory, and most producers have guided to no growth this year until the bottleneck is resolved. Relief won’t come until 4Q26, when the Hugh Brinson and Blackcomb pipelines are due to start.
- Higher global gas prices should spur more LNG exports, but terminals are already operating near capacity (see figure at right). LNG cargoes will become more profitable for offtakers, but there is little room to dial up supply in the near term.
- LPG exporters have the most upside to replace lost Middle East supply in India and Asia. But even these deliveries will be limited by butane-blending requirements and a queue of backed-up cargoes caused by recent fog on the Gulf Coast.
While the Permian is constrained, operators in other liquids basins could elect to return idled rigs in response to higher oil prices. We see potential in the Bakken, Powder River, Denver-Julesburg and Anadarko. These basins have lost about 35 rigs combined since April 2025 (see figure above from Energy Data Studio).
However, several factors mitigate against a robust rig response. For one, public operators just set budgets and released 2026 guidance to investors, and may be reluctant to pivot so quickly to increased spending. Second, the jump in WTI prices has mostly occurred in the front of the curve as traders bet that disruptions will be quickly resolved in the Middle East. Contracts in 2H26 settled in a $69-74/bbl range Monday. These contracts coincide with the window when new supply would hit the market from increased drilling today, providing less of an incentive than headline numbers suggest.
East Daley sees the oil price spike more as a near-term opportunity for producers to hedge and improve balance sheets. A sustained price increase on the back end of the price curve is necessary to bring more operators off the sidelines.
Those circumstances could arise from further chaos in the Middle East. A prolonged closure of the Strait of Hormuz is the greatest risk. The Trump administration is offering $20B in reinsurance, available through the US International Development Finance Corp., so tankers will resume navigations. It remains to be seen if the measure will be an adequate incentive to restart the flow of energy products through the strait.
A prolonged shutdown at the Ras Laffan LNG complex could also change the long-term gas outlook. Qatar is a chief competitor to the US for supplying LNG around the globe. QatarEnergy is also building a massive expansion at Ras Laffan that aims to nearly double LNG output to 142 Mtpa by 2030. That project, along with the buildout underway in the US, has fueled concerns of LNG oversupply by the end of the decade.
Much as Russia’s war on Ukraine led to a surge in contracting for US LNG, Lower 48 projects could see further tailwinds if doubts grow among LNG buyers over the reliability of Qatari supply. In that case, an already bullish outlook for US gas demand would gain more steam, with implications for price and midstream investments. – Andrew Ware.
Download Part II of East Daley’s Permian Basin White Paper Series
The Permian Basin’s next big buildout is already taking shape, but this time the driver isn’t crude oil. In The Permian Basin at a Crossroads: Why This Pipeline Boom is Different, East Daley Analytics’ latest white paper reveals how gas demand from AI data centers, utilities and LNG exports is rewriting the midstream playbook in the leading US basin. Over 10 Bcf/d of new capacity and $12 billion in investments are reshaping flows, turning the Permian into a gas powerhouse even as rigs decline. Read Part II: Why This Pipeline Boom is Different
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