The Trump administration, facing pressure from midterm elections to fulfill its promises of lowering living costs, is urgently evaluating various intervention tools to curb rising oil prices amid spikes caused by Middle East conflicts. However, it has already ruled out the most controversial option: direct participation by the U.S. Treasury in crude oil futures trading. According to informed sources, officials had discussed having the Treasury engage in buying and selling crude oil futures but concluded that the measure's ability to substantially impact the market is limited. The source noted that daily trading activity in crude oil futures has surged significantly due to the outbreak of conflict, diluting the potential influence of any single participant.
Concurrently, the Trump administration is reluctant to immediately tap the Strategic Petroleum Reserve (SPR), as its inventory levels stand at only about 60% following heavy usage during former President Joe Biden's term. Losses from frequent releases of the reserve and the need for deferred maintenance introduce further complications. Nevertheless, if the administration ultimately decides to activate this measure, even a modest release could send an important signal for market stability.
The proposal for direct Treasury involvement in crude oil futures trading attracted significant attention partly due to the extensive financial background of current Treasury Secretary. With decades of experience in trading currencies, bonds, and commodities, the Secretary's trader instincts may have spurred this unconventional idea. However, informed sources stated that the plan has now been explicitly excluded. Price Futures Group senior analyst Phil Flynn described the concept as a "highly creative out-of-the-box move," suggesting a potential strategy of "selling near-term futures and buying longer-dated ones" to depress front-month contract prices and calm market panic. He also pointed out that the Treasury's traditional functions focus on fiscal policy, debt management, and occasional foreign exchange intervention, with no prior involvement in commodities like oil. The fundamental misalignment with the Treasury's statutory responsibilities ultimately halted the proposal at the discussion stage.
In reality, the idea faced skepticism from its inception. Market analysts widely believe that the effectiveness of financial instruments is severely constrained by physical market fundamentals. Stratas Advisors President John Paisie noted that while such a move might temporarily curb speculative behavior by signaling deterrence, it cannot resolve the core issue: the immense threat of a potential closure of the Strait of Hormuz, with no spare capacity available outside the Gulf to fill the gap. He stated, "If significant oil supply disruptions persist, financial operations won't work. Traders will continue betting on higher prices because they should reflect this shortage." IG market analyst Tony Sycamore argued that the oil market, being vast and driven by real supply and demand, is difficult to sway by symbolic actions. "Even if the Treasury intervenes in futures contracts, it might create a brief pause or scare off some speculative longs, but I doubt the effect would last more than a day or two," he said.
As of the latest update, Brent crude futures rose 0.12% to $85.51 per barrel, while WTI crude futures fell 0.12% to $80.91 per barrel. Data shows Brent crude futures have accumulated a 17% gain this week, heading for their largest weekly increase since 2022. The surge in oil prices this week has refocused market attention on domestic inflation pressures in the United States. During last month's State of the Union address, former President Trump prominently highlighted falling gasoline prices, asserting that inflation was "plummeting." The current reversal and rise in oil prices directly challenge this narrative.
More critically, soaring oil prices run counter to Trump's core objective of reducing government borrowing costs. Trump has persistently urged the Federal Reserve to lower interest rates, partly motivated by the aim of alleviating the approximately $1 trillion annual federal debt burden. However, rising oil prices are fueling concerns about resurgent inflation, dampening market expectations for Fed rate cuts while pushing up U.S. Treasury yields.
Trump has hinted at "forthcoming actions" to stabilize oil prices, as the Treasury Department simultaneously announced a temporary waiver for Indian refiners importing Russian crude. Reports indicate the White House is still weighing multiple options, including providing insurance guarantees for tankers transiting the Strait of Hormuz, organizing naval escorts, and temporarily waiving fuel blending requirements. U.S. Secretary of the Interior Doug Burgum stated on Thursday that the Trump administration is evaluating a range of options to address soaring crude and gasoline prices during the war. In an interview, he said "all options are on the table," adding that the list includes both immediate actions and longer-term, more complex measures. Burgum is scheduled to meet with Trump in Washington on Friday afternoon. Discussing the insurance guarantee plan, Burgum said, "As the federal government, we have an opportunity to step in and create, I would say, a semblance of normalcy. The United States can assume some risk to ensure our allies worldwide have adequate supply. We are the only country that can do this because we have the financial strength and naval power to make it happen."