The U.S. is maxing out its strategic oil reserves as Trump vows to control the Strait of Hormuz

By Myra P. Saefong

Strategic Petroleum Reserve stockpiles are precariously low and have been hit by major equipment failures, leaks and spills, according to a government report

Motorists in Tehran drive vehicles past a political billboard depicting U.S. President Donald Trump.

President Donald Trump made a new push Monday to exert more control over the Strait of Hormuz, a global oil chokepoint that is over 7,000 miles from the U.S.

The tensions come as a fragile U.S.-Iran cease-fire deal has been unraveling, and as another crisis brews closer to home: U.S. emergency crude-oil reserves now sit at their lowest levels since the 1980s, and are plagued by aging infrastructure.

Following failed attempts to fully reopen the Strait of Hormuz, Trump said Monday that the U.S. should run the Strait of Hormuz - a waterway located between Iran and Oman, which connects the Persian Gulf to the Gulf of Oman, the Arabian Sea and the wider Indian Ocean.

"We're going to keep the strait, and we'll probably run it," Trump said in a morning interview with Fox News. "And we should be reimbursed for that."

Later in the day, Trump made threats to strike Iran on Monday evening and potentially Tuesday in an interview on "The Hugh Hewitt Show." Soon after, the U.S. Central Command announced it had launched strikes against Iran for the third consecutive night.

The president's comments come as the U.S.-Iran conflict has dragged on far longer than the White House initially outlined, at more than four months and counting. Meanwhile, the U.S. has been racing to offset a global oil shock it helped instigate by yanking supplies from the national Strategic Petroleum Reserve, or SPR.

With the strait seeing only limited maritime traffic in recent days, and with the U.S. economy still going strong and in the middle of travel season, "we might witness a further collapse in strategic and commercial reserves," which could lead to even higher prices for oil, said Samer Hasn, senior market analyst at XS.com.

Crude-oil stocks in the SPR - a program created in the wake of the Arab oil embargo in the 1970s to deal with shortages of crude - fell to 319.5 million barrels as of the week ended July 3. That's the lowest since 1983, according to data from the Energy Information Administration.

Releases of oil from the SPR helped offset supply lost to transportation disruptions in the Strait of Hormuz after the U.S. and Israel attacked Iran at the end of February.

Back in March, the U.S. authorized the release of 172 million barrels of oil from the SPR over a period of about 120 days, as part of the International Energy Agency's agreement to release 400 million barrels of oil from its members' emergency reserves.

In a review of the U.S. Energy Department's management of the SPR, released to the public in late June, the U.S. Government Accountability Office (GAO) said Congress and the Energy Department lacked a unified long-term plan for the SPR, while pointing to aging infrastructure, leaks, structural problems and spills.

The GAO said the SPR experienced 16 major equipment failures since 2013. In January of this year, nearly 170 barrels of crude spilled at one facility in Texas due to a split in a crude pipe. The GAO recommended that Congress temporarily limit nonemergency sales from the reserve and authorize a funding mechanism to help the Energy Department cover ongoing or periodic costs for maintaining the SPR.

But the global oil market remains in an emergency situation, with the Strait of Hormuz now only seeing the passage of a small number of ships. Before the war, about 25% of the world's seaborne oil trade transited through the strait.

The Strait of Hormuz was supposed to be reopened following the latest U.S.-Iran cease-fire signed in mid-June, but maritime traffic through the waterway never fully returned to normal operations.

Six tankers crossed through the strait Sunday without their automatic identification systems on, according to data from Kpler - with two entering and four exiting the waterway. That compares with an average of 25 over the seven days prior to that, Kpler said.

SPR supplies near a limit

Oil supplies in the SPR stand precariously close to what could be a limit.

Sizing studies done on the SPR in the 1970s recommended an inventory minimum of 250 million barrels. The reserve can hold up to 727 million barrels.

So, if the congressionally mandated minimum is at about 250 million barrels and there are just over 300 million barrels left in the SPR, the U.S. possibly could release 1 million barrels per day for 60 days, or 2 million barrels a day for 30 days, noted Michael Lynch, president of Strategic Energy & Economic Research.

"Then what?" Lynch asked. "Trump could ignore the law," he told MarketWatch - but operationally, going below 250 million barrels can create technical problems. "Trump appears to have trouble parsing the complex nature of the oil market."

A MarketWatch request for comments from the Energy Department for details on the minimum SPR level allowed by Congress wasn't immediately answered.

While the U.S. is the world's largest crude-oil producer, it won't necessarily be shielded from higher oil prices globally.

Sure, the U.S. is significantly less dependent on imported crude compared with other countries, said Hani Abuagla, senior market analyst at XTB MENA, the Middle East and North Africa unit of European brokerage house XTB.

However, oil pricing is global in nature. So "even if domestic supply remains sufficient, any sustained disruption to flows through the Strait of Hormuz would push Brent and WTI benchmarks higher, increasing fuel costs worldwide," Abuagla said. That could keep inflationary pressures high.

The Federal Reserve would then more inclined to move toward higher interest rates, which could weigh on economic activity and consumer spending, Abuagla added.

Oil prices climb

On Monday, oil prices climbed, with U.S. benchmark West Texas Intermediate crude for August delivery (CL.1) (CLQ26) up 9.4% to settle at $78.14 a barrel. Global benchmark Brent crude's September contract (BRN00) (BRNU26) was up 9.6%, ending at $83.30 a barrel. Oil futures continued to tick higher in overnight trading.

In a Truth Social post, Trump specified that the U.S. will be reimbursed at a rate of 20% of all cargo shipped to cover costs necessary to do the job of providing safety and security in the strait.

The Strait of Hormuz is open and will remain open, with or without Iran, Trump claimed. The U.S. is also reinstating a blockade against Iranian ports to stop the country's ships or customers from entering or leaving the waterway, he added.

-Myra P. Saefong

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07-13-26 2230ET