Oil Prices, National Debt Loom as Threats

PUBLISHED MARCH 2026

The West Texas Intermediate benchmark surged since closing at $67.02 a barrel just before the war commenced on Feb. 28 (which significantly increased risks to the global oil trade through the Strait of Hormuz). One-fifth of the world’s oil and gas flows through that strategic waterway, but tanker traffic there has recently ground to a halt, with hundreds of ships seemingly trapped on each side of that critical chokepoint.

This spike in oil prices did not take long. After topping $70 per barrel, the onset of hostilities saw crude oil continue to climb, breaking through $80 and then $90 in the first week of March. The surge did not stop there. As futures reopened the following week, the WTI benchmark took out $100 and then $110, before easing back somewhat.

The International Energy Agency, comprising 32 countries that include the United States, subsequently agreed to release 400 million barrels of oil from their emergency reserves. This far exceeds the 183 million barrels the IEA released after Russia’s 2022 invasion of Ukraine. Separately, Japan announced it would also release 80 million barrels from its reserves. For some context, global oil production was just over 100 million barrels per day before the war began, and analysts estimate 11-16 million barrels of supply will be lost every day during disruptions in the Persian Gulf. The reserves from the IEA and Japan would cover only 30-44 days if that disruption continues for longer.

Wall Street took relief from the temporary supply news, but oil prices may have not fallen further because those announcements were already priced in, and getting supply into the market takes time. The U.S. Energy Department says it takes 13 days for oil from the nation’s Strategic Petroleum Reserve to come online. Meanwhile, some private shipping firms told the WSJ that Iran’s oil exports had increased from February.

Bloomberg News also reported recently that President Trump would invoke emergency powers to ease permitting for oil production off the coast of California. The Houston-based company that owns those idle rigs had previously said its production capacity there is between 45,000 and 55,000 barrels per day.

In Iran, Mojtaba Khamenei was elected as the next Supreme Leader, and looks set to continue in the hardline ways of his father, Ayatollah Ali Khamenei. It is already rumored the new leader has been seriously wounded. Meanwhile, crude production has been reduced across the Gulf, in countries like Kuwait, the UAE, Iraq, and Bahrain, amid shipping troubles and relentless attacks. There are also worries about GDP and resurgent inflation, complicating the picture for the U.S. economy and the globe.

“Short-term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A. and World Safety and Peace. ONLY FOOLS WOULD THINK DIFFERENTLY!” President Trump recently wrote on Truth Social.

The S&P 500’s next major move likely hinges on oil-price direction amid geopolitical tensions and supply dynamics. A spike to $120 oil could trigger a 5-10 percent correction in the S&P 500, as well as stagflation, higher yields, and margin economic compression. If oil collapses to $60 as war premiums fade, we might expect a relief rally and acceleration of the AI-driven bull market. 

The Ever-Growing U.S Debt 

Another grim fiscal milestone is making waves as the gross federal debt of the United States topped $39 trillion. This red ink arrives a mere five months after the debt breached $38 trillion, and just seven months after hitting $37 trillion! 

Interest rate payments have become the third-largest monthly outlay for the federal government, while legislation like the “One Big Beautiful Bill” exacerbated the problem and defense expenditures are not easily contained. Maybe worse yet, no one wants to touch popular entitlements like Medicare, Medicaid, and Social Security. Some say those programs now go way beyond what was originally envisioned, especially since the fastest-growing age group in the U.S. is people 65 and older. This benefit receiving population will only become a larger voting base in the years to come. 

Nearly three-quarters of U.S. federal spending now effectively goes on auto-pilot, without congressional review! Commentators often lament how divided Americans supposedly are. But is this true? What percentage of the federal budget do the two parties fight over? Only around 15% it seems. In other words, Democrats and Republicans apparently agree on most federal spending. They both seem to support a massive wealth transfer from young workers to seniors. In America, our politicians act as if we can finance an ever more generous retirement state, despite our growing military spending, an aging population, plummeting fertility rates, and less than desirable economic growth. 

Focusing only on age as a concerning demographic may also ignore the many current Boomers who face poverty and lack “luxury” assets. Reforms to government insurance programs or raising the retirement age would still be a wise trajectory, as well as changes to the tax code and caps on spending. Alarm bells should also be going off in Washington given successive downgrades to the U.S. government credit rating, and what it might mean for bond yields, the dollar, and the long-term stability of the financial system.