Iran war is hurting Americans at the gas pump with higher prices

War with Iran rattles energy markets

The U.S.-Iran conflict that started Feb. 28 is already hitting Americans where it hurts: the gas pump.

After the U.S. and Israel launched strikes on Iran, the average price for a gallon of regular gas jumped 11 cents overnight to $3.11 on Tuesday.

That marked the biggest single-day spike since March 4, 2022, according to GasBuddy analyst Patrick De Haan.

Oil prices surged, the stock market swung wildly, and the Strait of Hormuz, a waterway that carries about 20% of the world’s daily oil, ground to a near halt.

Iran shut down a vital oil route

The Strait of Hormuz sits between Iran and Oman, and it connects the Persian Gulf to the open ocean. About 20% of the world’s daily oil supply passes through it, along with large volumes of liquefied natural gas.

After U.S. and Israeli strikes hit Iran over the weekend, an Iranian Revolutionary Guard commander said the strait was closed and warned that any ship trying to pass through would be targeted.

Tanker traffic dropped to nearly zero, and more than 150 ships anchored outside the strait to avoid risk.

Ships stopped moving before any blockade

Iran never had to set up a formal naval blockade to shut down the strait.

Major marine insurers, including Norway’s Gard and Britain’s NorthStandard, pulled war risk coverage for ships in the Persian Gulf.

Protection and indemnity insurance was removed for March 5, making the financial risk too high for ship owners.

As one oil analyst put it, Iran can’t shut down the strait by itself, but insurance companies and ship operators can. Without coverage, tanker owners simply refused to sail.

Oil prices surged past levels not seen in months

Global oil prices on Monday hit their highest level in more than eight months.

Brent crude, the global benchmark, jumped nearly 9% to about $79 a barrel, while U.S. West Texas Intermediate rose about 6%. By Tuesday, U.S. crude climbed another 6% to about $75 a barrel, and Brent reached about $82.

Analysts at Bank of America warned that a long disruption in the strait could push Brent prices up by $40 to $80 per barrel above current levels.

Gas prices started climbing right away

The national average for unleaded gas hit $3.11 a gallon on Tuesday, up 11 cents overnight, according to AAA.

GasBuddy’s De Haan estimated that drivers could see prices rise 10 to 30 cents on average in the days ahead, with some stations jumping as much as 85 cents.

Oil analyst Tom Kloza, now working for Gulf Oil, told reporters he expects the national average to reach between $3.25 and $3.50 in the coming weeks.

Gas prices had actually been falling before the conflict, sitting about 11 cents lower than a year earlier.

Wall Street had wild swings all week

On Monday, the Dow fell nearly 600 points before recovering to close down just 73 points. Tuesday was even rougher.

The Dow dropped more than 1,200 points at its low before ending the day down about 400 points.

Defense stocks like Lockheed Martin and Northrop Grumman rose sharply, while airline stocks including Delta and American Airlines fell.

By Wednesday, markets bounced back after reports that Iran had approached the U.S. about talks to end the fighting.

Trump promised to keep oil flowing

President Trump said Tuesday that the U.S. Navy would escort tankers through the Strait of Hormuz if needed. He also said the government would offer insurance to ship owners to get traffic moving again.

Oil prices pulled back from their highs after Trump’s announcement, with U.S. crude settling at about $75 a barrel.

Secretary of State Marco Rubio said the administration had anticipated the energy disruption and had a plan ready to roll out.

OPEC tried to help but faces limits

Over the weekend, the energy cartel OPEC+ agreed to a production increase larger than expected. In a normal market, that would push prices down.

But there is a catch. Energy analyst Helima Croft at the bank RBC noted that the extra barrels are meaningless if they can’t reach buyers through the strait.

Saudi Arabia’s East-West Pipeline and the UAE’s Fujairah pipeline offer partial alternatives, but neither can fully replace the strait’s capacity.

If the conflict drags on past a few weeks, Gulf producers may have to stop pumping altogether.

Drivers may feel more pain if the war drags on

Trump said Monday the war could last up to five weeks.

It takes about six weeks for crude oil to be processed and turned into gasoline for delivery, according to energy experts at New York University, so the full impact at the pump could be delayed. But wholesale prices move much faster.

One analyst told reporters that wholesale gas prices jumped 25 cents a gallon almost immediately after the strikes. How long the strait stays shut will determine how high prices go and how long they stay there.

Markets watch for what comes next

On Wednesday, stocks rose after a report that Iran had reached out to the U.S. about potential talks. The Dow gained about 238 points, and the S&P 500 rose nearly 0.8%.

Oil prices eased slightly after Trump’s pledge to secure the strait. But the situation remains unpredictable.

Wall Street’s fear gauge, the VIX, hit its highest level in three months on Tuesday, and analysts said the conflict’s length will decide whether the damage to markets and gas prices is temporary or lasting.

This article was created with AI assistance and human editing.

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