U.S. Oil and Gas Sector Faces Uncertainty Amid Geopolitical Tensions

The U.S. oil and gas sector experienced a modest increase in activity during the first quarter of 2026, as reported by the Dallas Federal Reserve's Energy Survey. The business activity index rose from -6.2 in the previous quarter to 21.0, indicating a shift towards expansion. Despite this positive trend, uncertainty remains high due to geopolitical tensions, particularly the ongoing conflict in the Middle East, which has significantly impacted energy commodity prices.

Oil and gas activity rises amid elevated uncertainty

The volatility in energy prices, exacerbated by the war in the Middle East, has created challenges for firms planning production. Executives expressed concerns about making long-term commitments, with many indicating that uncertainty will persist until safe navigation through the Strait of Hormuz is assured. Approximately half of the surveyed exploration and production companies do not anticipate increasing the number of wells drilled this year, while 47% plan to drill slightly or significantly more.

Oil executives say price swings make it hard to 'drill, baby, drill,' Dallas Fed survey shows

Survey participants expect the price of West Texas Intermediate (WTI) crude oil to average $74 per barrel by the end of 2026, a notable increase from earlier estimates. Additionally, they forecast a Henry Hub natural gas price of $3.60 per million British thermal units (MMBtu) for the same period. These projections reflect a broader expectation that prices will stabilize once geopolitical tensions ease.

Oil and gas activity rises amid elevated uncertaintyOil executives say price swings make it hard to 'drill, baby, drill,' Dallas Fed survey showsBloomberg

While overall employment in the oil sector remained unchanged, the aggregate wages and benefits index increased from 6.2 to 23.5, suggesting that firms are beginning to invest in their workforce despite the prevailing uncertainty. Input costs for oilfield services also rose, with the finding and development costs index increasing from 5.7 to 22.3, indicating that operational expenses are becoming a growing concern for companies.

Oil and gas activity rises amid elevated uncertainty

Industry executives have voiced frustration over the unpredictability of oil prices, with one respondent stating, “The volatility across all the commodities is just insane and makes planning very difficult.” This sentiment reflects a broader anxiety within the sector about the sustainability of current oil prices and the potential for further disruptions due to geopolitical events.

Bloomberg

• “The volatility across all the commodities is just insane and makes planning very difficult,” — Anonymous, Energy Executive

Bloomberg

• “In the quarter ahead, all pricing is uncertain until safe navigation through the Strait of Hormuz can be achieved.” — Anonymous, Energy Executive

Oil executives say price swings make it hard to 'drill, baby, drill,' Dallas Fed survey shows

• “How sustainable are current oil prices? Hard to make long-term commitments or to ‘drill, baby, drill,’” — Anonymous, Energy Executive

Oil executives say price swings make it hard to 'drill, baby, drill,' Dallas Fed survey shows

As the U.S. oil and gas sector navigates these turbulent times, the focus on energy security is expected to intensify. The outcome of the ongoing conflict in the Middle East will play a crucial role in determining future production levels and pricing stability. The next Dallas Fed Energy Survey is scheduled for release on June 24, 2026, which will provide further insights into how these dynamics evolve.

Bloomberg