Choke Point To Point. The Energy Report 03/26/2026

Oil prices are rising again after a correction linked to a 15-point peace plan, amid reports that Iran may threaten the Bab el-Mandeb Strait  which is the world’s second most important oil choke-point with support from the Yemen’s terror group the Houthi rebels. The Trump Administration claims Iranian leaders fear calling for peace with the US due to  the possibility of getting killed by their own people.

 Yet Iranian threat continues and after reports that Iran will resort to more terror attacks after the U.S. military said its joint operation with Israel had badly damaged or destroyed most Iranian facilities used to build missiles, drones and warships and now sending its Houthi minions to terrorize more ships like they have in the past.

 The threat against the  Bab el-Mandeb Strait  which is Arabic for “Gate of Tears” is critical as it is  a narrow chokepoint connecting the Red Sea to the Gulf of Aden and the Indian Ocean, located between Yemen on the Arabian Peninsula and Djibouti/Eritrea on the Horn of Africa.

It serves as a vital gateway for global shipping, particularly for vessels heading to or from the Suez Canal. Every year, it handles a significant portion of international maritime trade—roughly 10-12%—including thousands of ships carrying crude oil, refined petroleum products, liquefied natural gas (LNG), manufactured goods, and other essential cargo

Much of the oil originates from the Persian Gulf, flowing north toward Europe and North America or south toward Asian markets like China and India. Disruptions here (due to its narrow channels) can force rerouting around Africa’s Cape of Good Hope, raising shipping costs and delays something that could further cause price increases if they have any success and the threat could make war risk insurance skyrocket even further.

This comes as The Wall Street Journal reports that the U.S. military said its joint operation with Israel had badly damaged or destroyed most Iranian facilities used to build missiles, drones, and warships, while the White House threatened further attacks if Tehran doesn’t make a deal to end the conflict. President Trump, who has told associates that he wants the war brought to an end in the coming weeks, said the regime is in talks and wants a deal “so badly” but is afraid to say so because of fears of being killed. At the same time, he took some leaders off of the ‘kill list’ as they may be ones who want to work toward peace.

  Still the reopening of the Strait of Hormuz is critical. Reports by Iran that they own the Strait of Hormuz is as valid as me saying I own the Brooklyn Bride, which I thought I bought the last time I went to New York.

 Yet Iran’s IRGC has flat-out declared the strait “closed” and threatened that “if anyone tries to pass, the heroes of the Revolutionary Guards and the regular navy will set those ships ablaze.” They claim “complete control” and full sovereignty as the coastal state, insisting it’s only open to “non-hostile” vessels that coordinate in advance with Iranian authorities, stay out of any aggression against them, and—in at least some cases—pay up to $2 million for “safe passage”.

And while those bold claims will soon be challenged with an international coalition the reality is that the closing of the Strait of Hormuz due to the terror risk is creating mounting challenges. .

While the United States currently has sufficient oil supplies, as the Energy Information Administration reported yesterday that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 6.9 million barrels from the previous week. At 456.2 million barrels, U.S. crude oil inventories are about 0.1% above the five-year average for this time of year,  the rest of the world is significantly more vulnerable and is already feeling the impact with shortages and gas lines and LPG shortages in India

 And production shut-ins are increasing as the lack of the ability to move oil is forcing producers to cut back and even if the war ends today, it will take months to get that production back to full speed.

According to HFI Research, Gulf State shut-ins have reduced total oil production by 10.98 million barrels per day. The breakdown of lost output by country is as follows: Iraq has cut production by 3.6 million b/d, Kuwait by 2.35 million b/d, the United Arab Emirates by 1.8 million b/d, Saudi Arabia by 3.05 million b/d (though Saudi Arabia is drawing on its reserves), and Bahrain by 0.18 million b/d. These reductions highlight the severity of the current supply disruption and its potential effects on global energy markets.

One small consolation is that for the first time since the war started, gasoline prices actually went down, ending a record string of rising gas prices not seen since Joe Biden was elected president—when several of his anti-energy executive orders were widely viewed as a declaration of war on fossil fuels.

According to the latest AAA data, the national average for regular unleaded now stands at $3.981 per gallon, down slightly from yesterday’s $3.983. That modest dip breaks a sharp upward streak triggered by the ongoing Middle East conflict, during which prices had climbed rapidly from a month-ago average of $2.983 for regular (and even lower earlier in the period).

To provide some perspective, the current national averages for various fuel types reveal the recent changes at the pump. Regular gasoline now stands at $3.981 per gallon, which is slightly lower than yesterday’s average of $3.983. A week ago, the price was $3.884, while a month ago, it was significantly lower at $2.983. Compared to this time last year, regular gas was $3.150. Mid-grade fuel is now averaging $4.501 per gallon, up from $4.380 a week ago and $3.497 a month ago, with last year’s price at $3.623. Premium gasoline reached $4.867, up from $4.747 a week ago and $3.860 a month earlier, with last year’s average at $3.979. Diesel has seen a substantial increase, currently at $5.375 per gallon, compared to $5.099 a week ago, $3.757 a month ago, and $3.606 a year ago. E85 fuel is averaging $3.156 today, up from $3.060 a week ago and $2.324 a month ago, while last year it was $2.609.

While the daily pullback offers a brief breather at the pump, the broader surge since the war began has pushed prices significantly higher than recent baselines, underscoring the market’s sensitivity to global energy disruptions.

Amidst the chaos in Iran that’s shaking global markets, there’s some good news coming from Venezuela thanks to Trump’s energy policies. According to Reuters, Venezuela’s oil production—including condensate and gas liquids—hit 1.1 million barrels per day in March, based on figures shared by the state oil company PDVSA during a government presentation.

This is up from January, when they were producing 942,000 barrels each day. Acting President Delcy Rodriguez presented these numbers during a virtual conference in Miami. Venezuela has also increased its gasoline and diesel production—reaching 166,700 barrels per day in 2025, compared to 146,200 barrels daily in 2024, according to another slide from the presentation.

 Stil Venezuelan President Delcy Rodríguez could turn into a real headache for President Trump down the road. She’s playing ball right now—opening up Venezuela’s massive oil fields to foreign investment, releasing prisoners, and talking nice about cooperation—because Trump has her over a barrel with sanctions leverage and the threat of a fate worse than Maduro’s.

But this Chavista ‘Tsarina’ is no true reformer; she’s already publicly declared ‘enough of Washington’s orders,’ slow-walking real democratic elections, and quietly protecting her old networks. Once the immediate pressure eases and oil production ramps, she could drag her feet and  keep ties to China/Russia/Iran or even backslide and complicating Trump’s America First energy dominance plan. Tactical partner today… potential big problem tomorrow.

U.S. natural gas prices remain anchored in the low $3 range, with Henry Hub futures hovering around $2.90–$3.10/MMBtu. Domestic fundamentals are simply too strong to push prices higher right now.

But the story overseas is a completely different. European TTF prices have surged sharply to around €52–55/MWh (roughly $18/MMBtu equivalent), while Asian JKM prices sit near $20/MMBtu. Geopolitical tensions in the Middle East and recent supply disruptions out of Qatar have tightened global LNG flows, sending international benchmarks higher and reminding everyone just how valuable U.S. molecules are on the world stage.

Here at home, we continue to put out record production. U.S. output hit fresh all-time highs in 2025 (averaging 118.5 Bcf/d) and EIA forecasts point to even stronger numbers in 2026. That flood of supply, paired with storage levels that remain comfortably above the five-year average, is keeping a firm lid on prompt prices as we slide into the shoulder season.

All eyes today are on the EIA Weekly Natural Gas Report (data for the week ending March 20). After last week’s +35 Bcf injection, analysts are looking for a modest withdrawal of around 49 Bcf. A larger draw would be supportive; anything softer would reinforce the bearish domestic supply picture.

On the weather front, FOX Weather is calling for mostly mild, spring-like conditions across much of the Lower 48 this week. That forecast limits heating demand and keeps near-term consumption in check, though some early air-conditioning load could begin to show up in the power sector as temperatures creep higher. Still U.S. fundamentals remain bearish in the near term thanks to record production and adequate storage, but the global price disconnect creates a clear tailwind for LNG exports. Any pickup in overseas buying or a surprise weather-driven demand spike could quickly shift sentiment. We’ll see what the EIA prints and how the weather actually verifies — but the U.S. export machine remains the best long-term support for prices. And recent deveopments on the world stage shows how the US needs to continue to expand our export capacity.

So download the Fox Weather ap to keep up with that and stay tuned to the Fox Business Network. Oil producers is it time to hedge? Call me at 888-264-5665 or email me at pflynn@pricegroup.com