The conflict between the US and Iran continues to escalate, oil prices return above $80, and Washington may find it difficult to replicate its "oil market rescue" this time.

As the US-Iran war continues to escalate, oil prices are again under upward pressure, but this time Washington does not seem inclined to repeat previous tactics. Energy Secretary Chris Wright has made it clear that a new large-scale release from the US Strategic Petroleum Reserve (SPR) is basically off the table, with market expectations for a "policy backstop" now fading.

In an interview on Wednesday, Wright stated that after completing the 172 million barrel release plan announced in March, the authorities have "no intention" of further tapping the SPR. He added that the SPR remains well above its operational lower limit and the safety margin of the reserves is still ample.

Meanwhile, there is uncertainty over whether the remaining 38.4 million barrels in the March plan can be delivered as scheduled—a bidding round in late June saw lukewarm interest due to weak market demand.

The crude oil market is already feeling the strain. US commercial crude inventories have fallen to their lowest level since September 2018, benchmark futures prices have returned above $80 per barrel, and the national average retail gasoline price has once again broken through $4 per gallon.

The first round of SPR releases effectively curbed the initial price shock from the war, but whether this round can replicate those effects is doubted by the market.

SPR Nears Historic Low, Limited Room for Further Large-Scale Release

The current US SPR inventory stands at 307.7 million barrels, its lowest since the reserve was still being filled in the early 1980s, and the lowest point in over forty years. The substantial drawdown is largely a result of the historic releases during the Biden administration.

Analysts estimate the SPR's operational floor is around 150–200 million barrels, below which normal functioning would be affected. Wright noted that current reserves are "well above the operational lower limit," but this in itself reflects how much smaller the buffer has become.

Notably, the March releases used a "loan exchange" structure, requiring companies to return borrowed crude with interest after use. Wright said this means that the SPR will ultimately recover about 40 million barrels more than initially lent out, but the benefit will only be realized in future, and does not directly relieve the current supply gap.

Ongoing War Disruptions, Intensified Pressure on Energy Market

Continued US-Iran clashes are disrupting Middle Eastern energy exports and causing systemic shocks to global supply chains. Tensions in the Strait of Hormuz have increased the market's risk premium for supply disruptions, with higher crude futures feeding straight through to end-user prices.

US refineries are currently operating at record output, but this has still not prevented gasoline prices from once again breaching the $4-per-gallon threshold.

The ongoing fall in commercial crude inventories has further tightened the market's safety buffer. With short-term supply-side relief unlikely, the upward trend in energy prices is increasingly squeezing costs for consumers and businesses.

Uncertain Outlook for Remaining Release Plan, Policy Signals Remain Vague

As the March release plan nears its end, the policy trajectory remains uncertain. Wright stated that the government "will most likely" continue to offer the remaining 38.4 million barrels for sale, but his language was deliberately noncommittal, making no clear promise.

A round of SPR sales bidding in late June reflected weak market demand—at the time, oil prices had pulled back somewhat and both the US and Iran had signaled a possible ceasefire.

However, with renewed escalation in the conflict, the market landscape has shifted dramatically. Whether the remaining reserves can be smoothly released to the market, and how well they are absorbed, remains to be seen.

For investors, this means the current uptrend in oil prices lacks clear policy restraints, and risk premiums in the energy sector are likely to remain elevated for as long as the conflict continues.