Oil and gas prices are soaring as the Strait of Hormuz remains largely closed due to the Iran war, prompting concerns here at home about the cost of fuel at the pump.
The national average for gas prices shot up this week to over $4 a gallon, and diesel prices hit over $5 per gallon — the highest level since 2022, according to AAA data.
Oil prices have surged since the start of the Iran war, with U.S. benchmark West Texas Intermediate crude futures (CL=F) and Brent crude futures (BZ=F), the international benchmark, jumping to over $100 a barrel for the first time since 2022, when Russia launched an invasion of Ukraine.
In the aftermath of the strikes, shipping giants have halted operations and rerouted vessels originally intended to travel through the Strait of Hormuz — a crucial waterway for global oil shipments, as roughly 20% of global oil supply passes through it each day. Disruptions to this route can quickly impact global oil prices.
Analysts have warned that a protracted war with Iran could drive up energy prices and that supply disruptions abroad will have real impacts on fuel costs.
“This is something that’s going to start impacting gas prices starting today,” Patrick De Haan, head of petroleum analysis at GasBuddy, told Yahoo Finance following the initial attack on Iran. “The national average will start to tick higher. We could see gas prices by around lunch or even in the evening start to go up as gas stations are probably getting alerts themselves of a big price jump in the price that they pay.”
This comes amid a seasonal increase in gas prices, De Haan said, as most of the nation has already begun the transition to cleaner, more expensive summer gasoline blends.
The seasonal impact, plus “the attacks on Iran, is surely going to lead most motorists to see higher gas prices here, not just over the next few days, but really the next several weeks, if not two or three months.”
Read more: 5 ways oil prices over $100 a barrel could hit your wallet
While the U.S. is technically the world’s top oil producer, accounting for about 22% of the world’s oil production, the Middle East plays a major role, accounting for close to one-third of global oil production, and Iran is one of the top 10 oil producers.
The biggest risk to oil prices is the Strait of Hormuz, according to De Haan. Located between Iran and the UAE, the strait is the world’s most vital passageway for oil distribution. According to the U.S. Energy Information Administration, around 20 million barrels of crude oil and petroleum products flow through the strait every day.
However, shipping traffic has come to a halt after Iran’s Revolutionary Guard issued threats to fire at any ship trying to pass. Given that Iran’s oil production accounts for more than 4% of the global share, and the strait that connects other major oil-producing countries to the rest of the world is located along its border, this type of disruption has the power to shake the global market and cause severe supply chain disruptions.
The U.S. has been more insulated since the 1970s gas crisis, when oil-producing countries that were part of OPEC put an embargo on the U.S. and other nations, causing oil prices to surge and leading to gas shortages. The Iranian Revolution in 1979 further reduced supply, driving prices even higher.
On a macro level, geopolitical tensions can have serious implications across the globe, as oil is priced globally and driven by supply and demand, as well as by speculative investors who can drive prices up or down. This can trickle down to impact everyday consumers’ wallets.
Watch: Who sets oil prices? Inside the wild world of energy trading.
Meanwhile, diesel prices have increased by more than 50%, outpacing the rise of regular gas prices and hitting over $5 per gallon. Since the early 2000s, diesel prices have typically been higher than regular gas prices due to higher demand for diesel in the U.S., transitions to more eco-friendly diesel options that have, in turn, boosted production and distribution costs, and a higher excise tax on diesel than on regular gas.
Even if you drive an electric vehicle, this doesn’t mean you’re spared.
While only a small percentage of the population relies on diesel for their personal vehicles, higher diesel prices can still indirectly impact everyday Americans’ wallets. Freight vehicles such as semi-trucks and cargo ships primarily rely on diesel, which can translate to significantly higher shipping and distribution costs for companies — costs that can trickle down to consumers.
This means that every time you purchase something, the cost of transporting it from its manufacturer to your front door or to the shelves of your supermarket increases.
Read more: Shipping costs surge as fuel prices hit near record highs
Heavy-duty machinery used in farming and construction equipment also relies on diesel, which can drive up production costs across various industries.
So far, the Trump administration has taken steps to alleviate the burden of rising energy prices by ordering the release of 172 million barrels of oil from the U.S. Strategic Petroleum Reserve earlier in March. This decision was made alongside the 32 member countries of the International Energy Agency, who unanimously agreed to release 400 million barrels of oil from their emergency reserves to the market to address the global disruption.
However, the rollout of this release is expected to take 120 days, which could mean it will take some time for the impact of this decision to be felt by everyday consumers.
Other measures, such as fuel tax holidays, have been floated by lawmakers as a way to alleviate costs by temporarily suspending state or federal taxes on fuel. Similarly, subsidies and rebates could temporarily lower fuel costs at the pump but could impose steep costs on the government.
Ultimately, these measures would be temporary stopgaps. Reopening the Strait of Hormuz to release the bottleneck on oil shipments would be the fastest and most long-term solution to reduce oil and gas prices.
However, there’s no telling when this conflict will come to an end, and oil tankers will be able to travel in and out of the strait as they normally would.
Read more: What’s the Strategic Petroleum Reserve, and can it help lower gas prices?
As of now, the national average price for regular gasoline sits at $4.018, up from $3.977 a week ago and $2.982 last month, according to AAA.
It’s difficult to say exactly how gas prices will move over the coming days, weeks, and months; however, consumers should keep abreast of changes in oil prices, official statements by OPEC, U.S. sanctions or policy changes, and shipping activity to determine if their everyday costs may continue to be impacted.
In the meantime, there are also moves you can make to save money when you fill up.
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Fill up now if prices are climbing: Don’t wait for prices to continue rising. If you have an empty tank, fill up now to take advantage of the lowest possible price.
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Use gas price comparison apps: Finding the lowest possible fuel price in your area is easy with apps like GasBuddy and Gas Guru. Sometimes, taking a few extra minutes to compare prices in your area can save you several cents per gallon.
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Join a fuel rewards program: Loyalty to a specific gas station chain can help you earn discounts on every gallon of gas.
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Cut back on discretionary driving: Carpooling, biking, and walking can help cut down on discretionary driving and lower fuel costs during spikes.