Oil prices are about to skyrocket: How high could gas prices increase due to Trump’s war on Iran?

The United States began carrying out strikes against Iran on Saturday morning. The Islamic Republic was quick to retaliate with missile and drone attacks on its neighbors which are supporting the actions of Donald Trump as well as closing the Strait of Hormuz.

Roughly 20% of world oil supply passes through the strategic chokepoint connecting the Persian Gulf with the Gulf of Oman. When markets opened on Monday, shares traded on U.S. stock markets fell while oil and gas futures surged.

The price per barrel of West Texas Intermediate jumped 8.6% to nearly $73 in early trading while Brent crude futures shot up 9 % selling for over $79. Experts are warning that if the conflict continues for an extended period of time, it will likely send prices even higher, and the price of gasoline is almost sure to follow.

U.S. attacks on Iran could mean pain at the pump

At least three oil tanker ships have been hit by Iranian missiles and Tehran is warning that others should not attempt to cross the narrow strait. Many vessels are paying heed, with at least 150 parked in the waters on either side of the strait avoiding the risk of passage.

More concerning though is that Tehran may target oil and gas infrastructure. Iran attempted a drone strike on Ras Tanura refinery, Saudi Arabia’s largest with the capacity to process around 550,000 barrels a day. The facility had already been shut down as a precautionary measure.

Currently, the average price of gasoline in the United States is just under $3 per gallon. Elena Casas at Reuters says that an extra $10 per barrel could raise the price of gasoline by 20 to 30 cents per gallon at the pump.

Helima Croft, managing director at RBC Capital Markets, told MS Now’s Stephanie Ruhle that American consumers “could feel the effects very quickly if the Strait of Hormuz is not reopened.” Trump has said that the Operation Epic Fury could take four weeks or less. Croft explained “that is a path to four-dollar retail gasoline prices.”

This is because the U.S. has less room to manoeuvre than in the past, like when Russia invaded Ukraine. Croft explained that while crude prices spiked back in 2022, there ended up not being a disruption of supply. Additionally, the Biden administration released vast amounts from the nation’s strategic reserves.

This time around though, the world could be facing an extended disruption in the supply chain. As well, the U.S. has not fully restocked to the level prior to that other conflict with the strategic reserve holding almost 413,500 barrels now compared to nearly 579,000 in February 2022.

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