Crude hit a one-month high this week — WTI near $80, Brent around $85 — after fighting between the U.S. and Iran resumed and tanker traffic through the Strait of Hormuz fell by more than half. Brent remains well above its pre-conflict February level. If your family owns mineral rights, the next few royalty checks could benefit if higher prices persist.
Here’s the catch: a geopolitical premium isn’t a trend. Prices set by a chokepoint can reset in a week — they did exactly that after June’s interim deal. Treat the extra income as a windfall, not a new baseline.
Four moves worth making now. First, set aside cash for estimated taxes — royalty income is ordinary income, the 15% depletion allowance only softens it, and the September 15 payment comes due whether or not the spike lasts. Second, expect the phone to ring. Landmen lease and mineral buyers buy when prices spike — and bonus money is fully taxable, with no depletion allowance. Have the terms reviewed before you sign. Third, look at your portfolio. If your acreage already ties your net worth to crude, your investment accounts shouldn’t double that bet.
Fourth: if moving mineral interests to the next generation is on your list, a spike inflates the appraisal. The moment to transfer is when prices reset — not now.
At Lake Hills, we don’t forecast what happens in Hormuz — nobody can. Our systematic process responds to what markets actually do, and treats headline-driven surges as exactly what they are: noise our models were built to filter.
If royalty income is a meaningful part of your family’s picture, this is worth an hour. Give us a call.
For informational and educational purposes only. Not investment, tax, or legal advice. Lake Hills Wealth Management is an SEC-registered investment advisor.