Oklahoma oil companies are profiting, but a recent report says the state's greater economy will see only slight gains.
The Strait of Hormuz is a narrow waterway between the Persian Gulf and the Gulf of Oman. It's where 20 million barrels of crude oil are moved through on any given day. That's a fifth of the global supply.
Iran, which controls traffic through the strait, has closed it off since the U.S. launched an opening salvo of attacks on the country in February, citing the need to quell its nuclear weapon ambitions.
The conflict has led to higher gas prices, and it means energy companies in Oklahoma and across the country are making steep profits.
But as a late-May study from the Kansas City Federal Reserve branch in Oklahoma City points out, those profits aren't likely to spur greater economic and workforce growth in Oklahoma.
Cortney Cowley serves as the Assistant Vice President for the Kansas City Federal Reserve, leading the Oklahoma City Branch. She is also a co-author of the study in the Oklahoma Economist. She says prices for natural gas – a greater driver of the state's economy than oil – are slowly dropping and companies are holding off on new drilling projects while they wait out the war.
"Oftentimes when we see higher prices, especially for a global commodity like oil, we think, oh, wow, this is great for a state like Oklahoma… because we still, I think, identify in a lot of ways as an energy state," Cowley said. "We are an energy state, but we're really first and foremost a natural gas state."As a regional economy more than a global one, Cowley said, there is a lot of natural gas to go around. And even if prices have slowly risen in recent years due to increased demand for electricity and liquefied natural gas, the war in Iran actually helps slow that increase.
"The main reason is, because when you have oil prices, the oil heavy basins like the Permian and, even the Balkan to a certain extent, start to produce more oil and therefore more associated natural gas, which puts downward pressure on natural gas prices overall."
In other words, there is even more to go around than before because natural gas is also a by-product of drilling for oil. That means companies in Texas and other top drilling states are growing their operations, while their Oklahoma counterparts are forced to wait out a market shock and stay frugal with their investments.
Cowley said officials at the Dallas branch of the Federal Reserve have confirmed as much in their own regional energy surveys.
"We do know that firms in the Permian Basin have been talking about increasing drilling activity and producing more because of higher oil prices," she said. "Whereas in our survey … 53% of our producers said that they are experiencing higher profit margins, higher revenues, and a big part of that is higher oil prices, but only 16% are expecting to increase drilling activity."
In Texas, 47% of firms surveyed said they expect their oil drilling to increase at least slightly in 2026.
Cowley said more often than not, oil and natural gas prices move together and in the same direction, but closure of the Strait of Hormuz is unique in that it's bottlenecking oil transport globally, but not natural gas.
"And so because of that dynamic with other producers elsewhere, it just affects Oklahoma in a completely different way," she said.
Besides, conflicts end, and a single spike in oil prices is not an indicator of a lasting profit outlook. The best course of action for many natural gas producers in cases like this, Cowley said, is often to pinch their pennies and find other ways to increase productivity.
And oil and gas companies have a long history of doing just that.
"Oil and gas companies are price takers, not price setters," Cowley said. "They have to be willing to take what the economy gives them…And so these are companies that over time have experienced booms and busts and you know, really striving for productivity, efficiency and capital discipline."
