The price of oil continued climbing after major U.S. and Israeli attacks on Iran escalated the conflict, and the effects rippled through energy markets tied to the Persian Gulf and the Strait of Hormuz. With ships that carry about 20 million barrels a day stranded because they cannot safely pass through the narrow waterway, disruptions have hit supplies and damaged or halted operations at key oil and gas facilities, according to the reporting.
The tightening began to show up in crude benchmarks by midweek: oil prices surpassed $90 a barrel Friday, with American crude settling at $90.90—up 36% from a week earlier—and Brent rising to $92.69, up 27% over the week, the Associated Press reported. The same shipping bottleneck and facility outages have also contributed to the expectation of higher costs for gasoline, diesel and jet fuel, with drivers already noticing the increases at pumps.
While the war has also affected other parts of the region, energy analysts focused on how the disruption narrowed available supply from large producers and reduced flows through the region’s chokepoints. The conflict has left tankers and other vessels unable to move safely through the Strait of Hormuz, and the damage to oil and gas infrastructure has interrupted supplies, AP reported. Kuwait, for example, said Saturday that it would reduce its oil production as a “precautionary” measure due to the war, a step that could further jolt global energy markets.
As Americans and other consumers feel the impact, AAA reported that regular gasoline rose to $3.41 a gallon on Saturday, about 43 cents higher than a week earlier. AAA also said diesel was selling for $4.51 a gallon on Saturday, up about 75 cents from last week. Drivers in the U.S. described the shift as abrupt, with Mark Doran of Middlebury, Vermont, saying, “It’s crazy. It’s not needed, especially at a time when people are already struggling, but not unexpected from all this turmoil that’s going on,” and adding, “I don’t think there’s been an end in sight to any Middle East conflict that’s been started by us.”
Prices have also moved sharply outside the United States. Claudio Galimberti, chief economist at Rystad Energy, said diesel prices doubled in Europe and jet fuel prices rose by close to 200% in Asia, reflecting how markets that rely more heavily on Middle East energy supplies can react quickly when shipping routes tighten. He also said the list of disrupted facilities is long, including reports of vessels being hit and refineries or pipelines damaged, contributing to supply taken off the market because of shutdowns and precautionary measures.
The AP report also tied the energy squeeze to specific kinds of attacks and shutdowns. It said Iran launched retaliatory attacks that included a drone strike on the U.S. Embassy in Saudi Arabia and that Iran hit a major refinery in Saudi Arabia and a liquefied natural gas (LNG) facility in Qatar—actions that halted flows of refined products and took about 20% of the world’s LNG supply offline, according to Galimberti. He said roughly 9 million barrels of oil per day are off the market because of facilities being hit or producers taking precautionary measures, describing “an extreme deficit” for the market’s available supply.
U.S. policy actions aimed at restoring confidence in maritime trade have not changed the underlying market concern that ships and operators remain exposed to security risks in the shipping lanes. President Donald Trump said Monday the U.S. expected its military operations against Iran to last four to five weeks, and that it has “the capability to go far longer.” On Friday, AP reported, Trump appeared to rule out talks with Iran absent its “unconditional surrender.” The same reporting said Trump issued a plan Friday to insure losses up to approximately $20 billion in the Gulf region to help restore confidence in maritime trade and support American and allied businesses.
Energy experts said that insurance alone may not address the core problem. Amy Jaffe, director of the Energy, Climate Justice and Sustainability Lab at New York University, said in comments carried by AP: “The problem is that in the oil trading, oil shipping world, people are worried about counterterrorism,” adding that the concerns include “automated drone speedboats, weapon-carrying, flying drones and mines or other devices.” She said that to relieve the Strait of Hormuz bottleneck, the U.S. would need “some credible demonstration of solutions to the counter-terrorism problem.” Al Salazar, head of macro oil and gas research at Enverus, said, “The more news we get, the more it seems like this is going to last a really long time,” and also questioned what a “new normal” could look like if the Strait is reopened but security remains uncertain.
In the U.S., some consumers said they began filling up early, anticipating the increases that followed the start of military operations. Jerry Dalpiaz of Covington, Louisiana, told AP he started stocking up on “the day that they announced that the United States has started military operations against Iran” because he assumed gas prices would climb, and he said he felt for people living paycheck to paycheck who “have to drive to get to work and they have to change their oil and all those things,” calling for relief that “doesn’t seem to be coming anytime soon.”