A White House advisory office has produced a 13-page report asserting that tensions with Iran have added a sustained "terror premium" to global oil prices, making crude markedly more expensive over decades. The report, prepared by the Office of Trade and Manufacturing Policy and led by Peter Navarro, estimates that markets have priced in a $5 to $15 per barrel risk premium tied to the possibility of attacks or disruptions transiting the Strait of Hormuz.
According to the analysis, reducing Iran's capability to threaten regional energy infrastructure or interrupt shipping could remove or substantially shrink that geopolitical premium. "In that scenario, oil prices would likely move back toward equilibrium levels and potentially settle well below $60 per barrel under current supply conditions," the report states.
The document attempts to quantify the macroeconomic effect of Iran-related risks. It estimates that those risks historically elevated oil prices by 7% to 21% above fundamental levels, lowered global output by roughly 0.1% to 0.4% annually, and exacted an economic toll between $100 billion and $450 billion per year. Extrapolated over 25 years, the report suggests the cumulative impact could exceed $10 trillion, a figure the report frames as comparable to the combined annual output of two large industrial economies.
The report's conclusion aligns with an administration argument for a hard-line stance toward Tehran by portraying decisive action as delivering long-term economic gains through lower energy costs. By framing geopolitical risk reduction as a pathway to cheaper oil, the analysis positions aggressive measures against Iran as an economic as well as a strategic policy option.
Not all specialists accept the report's premises. The analysis has drawn skepticism from energy market experts, who question the evidentiary basis for a persistent premium and point to dimensions the report appears not to account for. Ed Hirs, an energy economist at the University of Houston, said he had not seen the report directly but that he knows of no verifiable evidence of such a premium. Hirs also emphasized that assessments often understate the potentially substantial costs of military conflict.
Hirs cited Federal Reserve research indicating that U.S. oil producers need roughly $70 per barrel to break even, challenging the report's suggestion that prices could settle below $60 a barrel if Iran-related risks disappeared. He also raised the question of the expense required to achieve the report's goals: "The question is what will it cost to obtain the goals," he said. "The truth is we just put it on the government Mastercard."
Recent military strikes involving the United States and Israel that have targeted Iran have already affected energy markets, the report notes and market movements confirm. Those actions have pushed oil prices higher and increased gasoline costs for U.S. consumers, developments the analysis warns could complicate the domestic economic agenda and potentially influence electoral dynamics ahead of the November midterm elections.
The White House trade and manufacturing office framed its draft analysis as an economic rationale for reducing Tehran's capacity to disrupt energy flows. Reuters viewed a draft of the report prepared by the office. While the analysis quantifies potential long-term savings tied to lower oil prices, critics argue the report does not sufficiently weigh military and other costs associated with pursuing the reductions in geopolitical risk.
Contextual note - The report connects geopolitical risk with energy costs and projects large cumulative economic impacts if the alleged premium were eliminated, but outside experts have highlighted both a lack of verifiable evidence for the premium and the omission of potential countervailing expenses.