Iran War Drives US Gas Prices Above $4
As the war in Iran enters its second month, gasoline prices continue to rise for US drivers without end.
On Thursday, the national average price for a gallon of regular, unleaded gas hit $4.08, according to AAA’s gas tracker. That marks a nearly 40% increase from $2.93 days before the US and Israel launched a bombing campaign against Iran that began on Feb. 28.
Experts who spoke with Money said Americans should expect high gas prices to remain even after the end of the Iran war. And when the war will end is a big, open question.
In his address to the nation on Wednesday, President Donald Trump gave an update on the war — and, to some extent, fuel prices — but did not set a clear timeline for the end of the war.
“Many Americans were concerned to see the recent increase in gas prices here at home,” Trump said. “This temporary escalation is entirely the result of the Iranian regime.”
Trump has accused Iran of disrupting oil prices because it has closed the Strait of Hormuz, a key international oil trading waterway off the country’s southern coast. He stated that the strait will reopen once the war is over.
“Once this conflict is over, the strait will naturally open. It will naturally open,” Trump said. “It will continue to flow and fuel prices will drop quickly.”
When Russia invaded Ukraine in February 2022, gasoline prices rose and peaked at more than $5 a liter later that year. But the spike was short-lived, and prices fell back to pre-war levels in November 2022.. However, experts do not expect electricity prices to drop quickly this time around, even in the best of circumstances.
“I don’t think it will be that obvious,” said Patrick De Haan, head of petroleum research at GasBuddy. “Things may get worse before they get better.”
When will fuel prices go back up?
The biggest factors driving up gas prices right now are the ongoing war in Iran and the closure of the Strait of Hormuz. Although the US produces most of the oil needed for electricity at home, oil is a global commodity, and large supply shocks affect its price.
For fuel prices to come down again, those international issues must be resolved first.
On Wednesday, Trump said the US was on track to end all of its war targets “soon,” although he suggested the war would last at least “two to three weeks” as the US plans to “attack. [Iran] it’s very difficult.”
Even if the war in Iran were to end today, experts say energy prices would remain high.
“It will take weeks, if not months, to reopen the Strait of Hormuz and for global oil production and prices to normalize,” Mark Zandi, chief economist at Moody’s Analytics, said in an email.
“There is also a slowdown in the fact that oil prices are falling and this is leading to a drop in gas prices,” he adds. “This is in line with the old saying that the price of fuel rises like a rocket and falls like a feather.
The type of fuel also makes a difference. Diesel and jet fuel, for example, have different supply chains and slower disruptions than gas. De Haan notes that the conflict will mainly affect airlines – and the price of plane tickets – in the coming months.
He says: “I won’t say you will lose time to travel in the summer, but it will be really difficult.”
‘No going back to $3 a litre’
It’s not just a question of when gas prices might drop, but by how much. Experts tell Money that drivers shouldn’t expect to see pre-war electric prices anytime soon.
“I don’t think that fuel prices will return to their pre-war levels because there will be a huge risk to the country that is now sold in the oil market,” said Andrew Lipow, president of energy consulting company Lipow Oil.
Now that Iran has closed the Strait of Hormuz, Lipow says that will remain a visible threat going forward. Basically, the cat is out of the bag.
Zandi and De Haan agree, saying that the potential for future shutdowns will make oil shipments more expensive, thus keeping gas prices higher for longer.
“Even if the war ends today,” Zandi said, “there is no going back to $3 a liter of unleaded conventional for the foreseeable future.”
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