After US military forces helped Israel bat down a barrage of some 300 Iranian missiles and drones on April 13, Biden reportedly urged Israeli Prime Minister Benjamin Netanyahu to “take the win.” Since the Iranian strike did little damage, Biden stressed, there was no need to retaliate.
Biden himself would surely like to take the win. The Iranian onslaught, fired after Israel killed several Iranian militants in Syria on April 1, showcased America’s technical wizardry and left financial markets intact. Oil prices rose in anticipation of the Iranian strike, as American officials warned it was coming. But they stabilized after the attack itself amid hopes that the first overt shootout between Israel and Iran would wind down without disrupting energy supplies.
The fight may not be over, however, and Biden now seems likely to face the possible fallout of a Middle East war — including rising oil and gasoline prices — all the way through Election Day in November. Energy costs have been a political threat to Biden since gasoline prices hit $5 per gallon in 2022 after Russia invaded Ukraine and global oil prices spiked. Getting gas prices down, and keeping them there, has been a top Biden priority ever since.
As Biden fights for reelection, that effort to keep a lid on costs borne by American drivers is likely to shape Biden’s handling of whatever comes next in the Middle East crisis, including the US response to Iran’s unprecedented aggression. Peace and stability may be the top US goals in the Middle East, but affordable energy is right behind them.
Two questions dominate the aftermath of Iran’s April 13 attack against Israel. The first is whether Israel will strike back at Iran, and if so, how. There’s a good chance the sparring will go another round. Israel’s war cabinet has reportedly endorsed retaliatory action, and some foreign-policy experts think the scale of Iran’s assault leaves Israel little choice but to hit back. If so, Biden would likely urge covert action or something that leaves Iran an escape hatch to deescalate, without disrupting energy flows.
The other big question is what the United States and its allies should do about Iran, which is the main backer of the Hamas terrorist group that attacked Israel last October, igniting the whole bonfire. Iran has grown into the main instigator of violence against Israel and is one of the world’s most dangerous nations.
There are several baskets of sanctions the United States could impose or reimpose on Iran, including some Congress could pass, forcing Biden’s hand. But there’s a huge catch for Biden: Most sanctions would target Iranian oil sales, which is where the nation’s theocratic regime gets most of its revenue. And limiting Iranian oil sales would push up global prices, ultimately hitting American drivers at the same time Biden is trying to persuade them he deserves another four years in the White House.
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“Election year political dynamics could discourage the Biden administration from tightening oil sanctions enforcement against Iran … because doing so could raise pump prices,” ClearView Energy Partners assessed in an April 14 analysis. The research firm estimates that a modest revival of sanctions against Iranian oil sales could raise oil prices by about $8.50 per barrel and US gasoline prices by about $0.20 per gallon.
If that doesn’t sound like a lot, you’re not thinking like Biden. During the last two years, Biden has taken several aggressive steps to lower US pump prices, including a large release of oil from the nation’s strategic reserve, sanctions relief allowing Venezuela to sell more oil, and another sanctions waiver for Iran itself, also bringing more oil onto global markets.
His logic is straightforward: Biden’s approval rating sank as inflation was heating up in 2022, and gas prices were heading to $5 per gallon. He probably thinks keeping gas prices well below $4 is imperative if he’s going to get reelected.
As it stands, oil and gasoline prices are at what you might call worrisome but not ruinous levels for Biden. In 2022, US crude peaked at slightly more than $120 per barrel, sending gas prices to $5 per gallon. Oil prices have been under $80 for much of the past year, and they settled at around $85 after the Iranian attack. Gas prices went as low as $3.20 per gallon at the start of 2024, though they’re now back to about $3.65. That level is probably OK for Biden, but he’d certainly prefer cheaper gas.
For the next six months, however, energy prices seem more likely to rise than fall. The Eurasia Group says it sees a 45% likelihood the Israeli war will continue in its current form, which could keep oil prices more or less where they are. The research firm places the odds of escalation at 40%, which could push oil prices well above $90 per barrel. Its odds of deescalation, with falling oil prices, are just 15%.
There are a number of levers Biden and America’s allies can pull to keep energy markets stable. The OPEC+ oil cartel has contributed to rising prices by cutting production during the last 18 months, and key members of the cartel, such as Saudi Arabia, could reverse those cuts, especially in an emergency.
China, which is Iran’s biggest oil customer, has been trying to beef up its influence in the region, and is probably advising the Iranians to cool it. China doesn’t mind seeing the United States tied up in foreign entanglements since that can distract the superpower from its own stated goal of containing China’s military expansion. But China is also the world’s largest oil importer, which means that, like American drivers, it benefits when prices are low and suffers when prices are high.
Biden also benefits, ironically, from record oil and natural gas production here in the United States, even though he has championed green energy and vowed to wean the US economy off carbon. You probably won’t hear him bragging about that, but for the next six months, some of Biden’s most important political allies could be American oil drillers. As in the Middle East, you take your friends where you find them.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Twitter at @rickjnewman.
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