Consumers and businesses will face higher costs “in the short run” as the war in Iran drives up the price of oil and gas, US National Economic Council Director Kevin Hassett acknowledged Sunday.
But once the Strait of Hormuz is fully opened, “a gusher of oil” will be released into the market and bring prices down, Hassett said on Fox News’ “Sunday Morning Futures.”
Securing safe passage for ships through the vital waterway has been a key aspect of negotiations on an elusive long-term peace deal with Iran.
Reopening the strait “could take a month or two,” Hassett said. “But once, basically, the gusher opens, then we expect that oil prices could drop relatively quickly, and certainly ahead of the (midterm) election.”
Some context: Oil prices have surged since the war began in late February, in large part due to ships being unable to pass through the Strait of Hormuz, which accounts for about 20% of oil flow.
Brent crude, the global benchmark, closed at about $100 per barrel on Friday, up from $73.21 a day before the war started. Goldman Sachs said last month that it expects Brent crude to remain above $90 a barrel through at least the end of the year.
The oil disruption has increased the national average for gas prices in the US to $4.52 a gallon, according to AAA.
Trump administration officials have repeatedly positioned the Iran war as short-term pain for long-term gain, as consumer sentiment reaches record lows.
Keep in mind: Lower oil prices will also depend on restarting oil production in the Middle East, after companies shut down some wells during the war. That process could take several weeks to restart. And strikes targeting energy and oil facilities in the Middle East could take years to repair, oil companies have warned.