Market volatility prompts update to Dallas Fed energy survey

As the 12 members of the Federal Open Market Committee gather next week, they will set monetary policy amid economic volatility tied to the conflict involving Iran.

Much of that volatility stems from energy markets, prompting researchers at the Federal Reserve Bank of Dallas to revisit their first-quarter 2026 Energy Survey.

In response to recent developments in global oil markets, Dallas Fed researchers sent energy executives a six-question survey. Approximately 120 firms responded: 78 exploration and production companies and 42 oilfield services companies.

One E&P executive commented, "The difference between the gyration of paper market oil prices versus what seems to be substantially higher physical prices sends conflicting signals to operators who cannot plan rigs and capital budgets when prices swing wildly based on tweets. Our hypothesis is [that] the paper market is being manipulated. This will likely lead to an even worse supply and demand imbalance and higher prices in the medium term (next 12 months)."

An oilfield services executive commented, "In response to the roughly 45 days of West Texas Intermediate over $75 per barrel, we are hearing increased talk of smaller operators adding rigs. We are also seeing larger independent operators move up drilling schedules. We don't have a clear idea of what Persian Gulf production levels will look like when the strait re-opens, but we don't expect an immediate ramp-up to previous (to closure) levels on account of the infrastructure damage during the bombing campaign. We are roughly estimating that when the strait reopens, we'll be working with a $70-$80 per barrel floor for WTI in the near future."

Executives were asked when they expect traffic through the Strait of Hormuz to return to normal levels. The most selected response was "by August 2026," chosen by 39% of executives, followed by 26% who expect normalization by November 2026. Twenty percent anticipate a recovery by May 2026. Fourteen percent of executives expect traffic to return to normal after November 2026.

Most executives said future disruptions in the Strait of Hormuz are likely. Forty-eight percent of respondents believe it is "very likely" that geopolitical events will disrupt traffic again within the next five years, while 38% view it as "somewhat likely." Only 14% of executives consider future disruptions "unlikely."

Executives were also asked what share of shut-in production in the Persian Gulf they expect will return eventually. Thirty-two percent of executives selected "100%," and another 32% selected "More than 90% but less than 100%." Twenty percent selected "More than 80% but not more than 90%." The remaining 15% of executives selected "80% or less."

Seventy percent of respondents expect U.S. oil production to increase in 2026 in response to the conflict. The most selected response, chosen by 43% of respondents, was "more than 0 but not more than 250,000 barrels per day." Seventeen percent selected "More than 250,000 barrels but not more than 500,000 barrels," and 10% selected higher amounts than that. The remaining 30% chose "no change."

More than three-quarters of executives expect U.S. oil production to increase in 2027 in response to the conflict. The most selected response was "more than 250,000 barrels per day but not more than 500,000 barrels per day," selected by 32% of respondents, followed by "more than 0 but not more than 250,000 barrels per day," chosen by 26%. Roughly 18% expect U.S. production in 2027 to grow by an amount larger than 500,000 barrels per day in response to the conflict. The remaining 24% selected "no change."

Fifty-nine percent of executives expect employment at their firms to remain the same from December 2025 to December 2026. The next most selected response was "increase slightly," chosen by 28% of executives. Four percent chose "increase significantly," while 6% selected "decrease slightly" and 2% chose "decrease significantly."

Most executives expect shipping costs from the Persian Gulf to rise after the conflict ends. The most selected response, in dollars per barrel, was "more than $2 but not more than $4" (36% of respondents).

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