Oil Prices Climb as Trump Turns to Economic Squeeze on Iran

A pledge that failed to calm the market

On Thursday, President Donald Trump said the United States would not resume airstrikes on Iran before the November 3 midterm elections. Oil traders did not treat that as good news. Brent crude briefly dropped, then rose to nearly $106 a barrel and settled at $104.28, up 4%. West Texas Intermediate, the U.S. benchmark, gained 3.6% to close at $91.49 after nearing $93 during the session.1 Diesel futures in Europe rose 6%, and heating oil, which traders use as a proxy for jet fuel, climbed more than 5%.1

The exact numbers vary by outlet and time of day. One report put Brent at $104.60 in the morning and WTI at $92.19.6 Another had Brent above $105.20 in European afternoon trading.8 All of them describe the same thing: a sharp move up in a single session that a presidential promise of restraint did not reverse.

The main reason is that holding off on bombing does not reduce the pressure on Iran. Washington has moved from a military campaign to an economic one. In August, after six months of fighting that the Center for American Progress calls a military stalemate, the administration launched "Operation Economic Outcast." The campaign aims to cut Iran off financially by watching ship-to-ship oil transfers, freezing digital-asset flows, tracking gold, and threatening secondary sanctions on countries that keep trading with Tehran.4 Treasury Secretary Scott Bessent has described a three-stage plan: military strikes first, then a naval blockade the president calls the "Iron Wall," and now economic isolation. He says Iran would have no oil at sea and no oil revenue this week, for the first time in its history.9

Why a softer military stance kept prices up

Traders appear to have concluded that this strategy keeps risk high. Trump's statement seemed to respond to reports that he was weighing strikes before the election, and those reports said he had not made a final decision.1 Axios reported that the Pentagon was preparing a new round of major combat operations against Iranian energy, infrastructure and nuclear targets.10 An Israeli official said the chance of strikes rises sharply after the midterms.6 A pause until November 3 therefore looks more like a delay than a policy change, and markets priced it that way.

Other risks added to the move. Traders were worried about reports of attacks by Iranian proxies in Saudi Arabia. Hurricane Isaias also caused rig shutdowns and crew evacuations in the Gulf of Mexico.1 Iran has increased attacks on tankers in the Strait of Hormuz, and senior oil officials have warned that global reserves are getting low.8 Iran had already threatened to hit energy infrastructure and shipping in the Red Sea, and possibly the Indian Ocean, if the U.S. resumes strikes.3

Is Hormuz open or closed? The figures disagree

The biggest disagreement in the coverage is over how much oil is actually getting through the Strait of Hormuz. NBC News, citing MarineTraffic data, reports that fewer than 23 ships a day crossed the strait between September 28 and early October. Before the war, hundreds crossed daily.1 The administration says the opposite. Energy Secretary Chris Wright said flows have been increasing, and Goldman Sachs estimated Persian Gulf oil exports at about 23.3 million barrels a day last week, roughly back to prewar levels, even as Iranian loadings collapsed.9 Reuters-sourced reporting also found that West Asian crude exports rose in September to 16.328 million barrels a day, the highest since the war began.5

Our reading is that both can be true. Fewer ships may be carrying larger loads, or traffic may be concentrated on routes protected by the U.S. Navy. Either way, the market is paying for how fragile that arrangement is, not just for the daily volume. Before the war, Brent cost about $72.3 It has stayed above $100 for weeks, despite a G7 stock release and rising Middle East exports that pushed crude down briefly in early October.30 Analysts warn that a wider conflict that damages major energy infrastructure could push Brent toward $150.1 The International Energy Agency has called the disruption the largest supply shock in the history of the oil market.2

Gasoline: a small weekly dip, but record highs for the season

At the pump, the news is mixed. AAA's national average for regular gasoline was $4.3669 on October 10.22 It was $4.36 on October 8, down about five cents from the week before, and $3.12 a year earlier.26 This is the first October on record with the national average above $4.27 September averaged $4.33 for the month, 50 cents above the previous September record set in 2023.22 On February 28, the day the U.S. and Israel launched strikes on Iran, the national average was $2.98.30

The recent dip is unlikely to last. Gasoline prices usually follow crude with a lag of a few days.7 AAA's rule of thumb is that each $1 increase in a barrel of crude adds about 2.4 to 2.5 cents per gallon.30 WTI settled at $88.28 on October 7 and then jumped nearly $5 the next morning.26 That jump will probably erase the weekly decline. AAA has also warned that Hurricane Isaias could raise prices if it disrupts production or refineries.29

Prices vary widely by region. California averaged $6.3148 on October 10, and Georgia was cheapest at $3.8196.23 On October 8, only nine states, all in the Midwest and South, were below $4.27 Diesel is a bigger concern. The national average was $6.32 last week, close to the all-time high of $6.53 set on September 22.30 CNN reports diesel is only about 20 cents below that record even after emergency measures in U.S. states and Europe.24 The administration has considered a diesel export ban, which the European Union called a "bad idea."3 It is reportedly also looking at allowing sales of red-dyed diesel instead.5 Both ideas show how much political pressure fuel prices are creating less than a month before the election.

Data centers: a separate energy pressure

Oil prices are not the only energy cost rising. Electricity demand from AI data centers is growing quickly, and the coverage is fairly consistent on how this connects to the oil shock: the link runs mostly through natural gas and power bills, not crude.

The forecasts are large. The IEA expects global data center electricity use to roughly double, from 485 TWh in 2025 to about 950 TWh in 2030. Power use at AI-focused facilities rose 50% last year.14 BloombergNEF expects gas burned to power U.S. data centers to increase by 15 billion cubic feet per day by 2035. That is more gas than any country now uses except China, Russia, Iran and the U.S., and more than double the firm's December forecast.13 Goldman Sachs projects U.S. data center power demand will rise about 160% from 2023 to 2030.12

Estimates of how much U.S. electricity data centers use today differ. A Lawrence Berkeley National Laboratory study put it at 4.4% in 2023.19 J.P. Morgan Asset Management estimates about 6% now and up to 14% by 2030 if all planned projects are built.20 The range reflects real uncertainty about how many proposed projects will actually be constructed.

For oil specifically, the direct effect is small, because data centers run on electricity, not crude.14 The more important connection is economic. The IMF has argued that AI-driven demand is helping offset the damage from the oil shock to global growth.2 This matters for monetary policy. Fed minutes from September showed most officials saw another rate hike as likely appropriate before year-end.8 A UBS economist noted that central banks trying to offset an oil shock would have to push the rest of the economy close to recession.10 The AI investment boom makes that harder, because it supports demand while energy costs are already high.

Households feel this on both their gasoline and electricity bills. J.P. Morgan notes that rising power prices are hitting consumers at the same time as oil near $100 a barrel, though it argues much of the increase in electricity costs began before the data center boom and is driven more by supply.20 The average residential electricity rate has risen 8.8% this year, to 18.83 cents per kilowatt-hour.16 Natural gas looks less stressed than oil for now. Henry Hub was trading around $3.12 to $3.27 per MMBtu in early October.1228 Analysts warn, however, that combined demand from data centers and LNG exports could end years of cheap U.S. gas.13

What to watch

In our view, Thursday's reaction shows that the market does not see economic pressure on Iran as a step back from conflict. Bessent's campaign may be cutting Iran's revenue, but it also gives Tehran less to lose, and Iran has already threatened to expand attacks to new shipping lanes.39 Until there is a verified deal on Hormuz, or real evidence that a large volume of non-Iranian crude can keep moving safely, Brent is likely to stay near or above $100. Gasoline will probably remain above $4 through the election, and diesel close to its record. Higher electricity costs from the data center buildout mean household energy bills are likely to stay high even if oil eventually eases.