Americans pulling into gas stations across the country are getting used to paying at least $4 per gallon. That probably won’t change soon, even with a temporary truce in the Iran War.
On Tuesday, the U.S. reached a two-week ceasefire agreement with Iran while officials negotiate an end to a month-long war that killed more than 5,000 people, mostly in Iran and Lebanon. During the war, Iran carried out missile attacks on oil facilities and other energy infrastructure that caused drastic production cuts in Saudi Arabia and other Persian Gulf nations.
With the clerical regime’s survival at stake, Tehran lashed out and upended the global economy. Iran virtually shut down all commercial traffic through the Strait of Hormuz during most of the conflict. The combined punches to energy supplies sent the cost of crude oil skyrocketing by 50% since Feb. 28, the start of the war.
An ensuing spike in gas prices has been among the most visible ways that Americans experienced the fallout of the conflict. Gas prices move in tandem with crude oil. They usually rise quickly like a rocket and fall gently like a feather in a trend that energy analysts labeled “rockets and feathers.”
Part of the lag can also be explained by the amount of time necessary for oil to be refined into gasoline, shipped to a distribution center and finally transported for sale at gas stations across the country. Gas prices reflect the expensive crude it was refined from.
The price of a Brent crude barrel hovered at around $96 on Friday afternoon. Following the ceasefire announcement, oil prices slid close to 20%. Some energy analysts believe it will take at least two weeks for gas prices to reflect the recent drop in the cost of crude oil.
A closed waterway means high gas prices for now
In the U.S., the average cost for a gallon of gas stood at $4.15 as of Friday, according to AAA. It’s the highest level since August 2022.
Since the ceasefire agreement is shaky at best, most shipping firms still believe routing oil and gas tankers through the economically vital waterway is too risky. Iranian state media has relayed that “99%” of ships are barred from entering the strait, citing Israel’s ongoing attacks across Lebanon.
Only two oil tankers crossed the Strait of Hormuz in the three days since the ceasefire announcement, according to data intelligence firm Kpler.
Scarce oil supplies and energy markets mean prices for gas and other consumer goods are likely to remain elevated for weeks, perhaps months after the conflict is over.
The U.S. Energy Information Administration on Tuesday released its short-term forecast for gas prices that accounted for the severe disruption in energy supplies through the strait. The agency said prices could climb even higher this month, peaking close to $4.30 per gallon.
It acknowledged the projections hinge on variables that haven’t been seen before, like the Strait of Hormuz’s closure and how normal commercial traffic is restored.
In the EIA’s forecast, elevated gas prices are here to stay in 2026. It projected gas will hover at $3.70 per gallon for this year, above the $3 level before the war broke out.
