Rising energy prices caused by the US-Israel war against Iran could affect the entire US economy, putting more pressure on consumers at a time when cost-of-living issues are already a paramount concern.
The price of crude oil has risen from about $67 a barrel before the war began on Feb. 28 to nearly $97 on Monday, as the conflict paralyzes production and transportation in one of the most energy-rich regions on the planet. Oil temporarily surpassed $100 a barrel on Sunday before retreating slightly.
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Price tracker GasBuddy reported Monday that the average price of gasoline in the United States rose 51 cents per gallon over the past week.
“Yes, yes, definitely,” said Alma Newell, 52, when asked if she was concerned about price increases at a gas station in the coastal town of Goleta, California.
Newell said he is out of work because of a shoulder injury and is concerned that rising costs could stretch his already limited budget.
“Prices have a big impact because I’m not working right now,” he said. “Food and rent are already very expensive.”
“It’s crazy,” he added. “Because war is very unnecessary.”
Cost of living issues
Rising prices could deepen frustration with U.S. President Donald Trump’s administration and put greater political pressure on the White House, which is already struggling to address cost-of-living issues with crucial midterm elections later this year.
“I think the current oil price rise suggests the U.S. will see $3.50 to $4 gasoline next week, and $5 diesel this week,” said Gregory Brew, senior Iran and oil analyst at Eurasia Group.
The highest average recorded for gasoline prices at the pump was in June 2022, when prices soared to $5,034, months after the Russian war against Ukraine began, according to Gas Buddy, which has tracked fuel prices since 2008.
“The impact (now) is more political than economic, as high gas prices generate negative press and may increase perceptions that the government is not properly managing the economy. That means Trump will feel more political pressure to quickly end this war.”
A Pew Research Center survey conducted in early February suggested widespread anxiety about the rising cost of living before the United States and Israel launched attacks on Iran, with 68 percent of respondents saying they were very or somewhat concerned about gas prices.
“I’m not too worried because I have a hybrid car and I ride a bike,” said Bjorn Birmir, 72, at the gas station in Goleta, California. “But for people in general, it will make life more expensive. Prices are already high, and that will make them even higher.”
Outages in progress
Disruptions caused by the war include the closure of the Strait of Hormuz, a key node for global shipping and transit. Iran has long said it could close the strait in the event of a confrontation with the United States and Israel.
About 20 percent of the world’s oil and a significant portion of natural gas pass through the strait, predominantly to Asia, supplies that are now stranded because traffic through the narrow waterway has stopped. Iranian attacks on energy infrastructure in countries in the region have also led some countries to reduce production.
Other economic sectors are also feeling the pressure.
Products such as fertilizers, vital to agricultural production, are seeing price increases just ahead of the spring planting season in the northern hemisphere. About a third of the world’s fertilizer trade passes through the Strait of Hormuz.
The effects of the war could affect the entire global economy, and poor countries would be the most affected. Pakistan on Monday announced a series of austerity measures and cuts to fuel subsidies, while Bangladesh closed universities and announced restrictions on fuel use as a result of the war.
U.S. officials and countries around the world have already discussed measures to help ease the impact of rising energy prices, including the possible release of strategic oil reserves in a bid to temporarily boost global supply.
The G7 said on Monday it would take “necessary measures” to support energy supplies, but stopped short of announcing the release of strategic reserves, and energy ministers will meet on Tuesday to discuss the matter further.
The United States has a strategic oil reserve of more than 415 million barrels, one of the largest in the world, which it could release in coordination with allied countries.
But it is unclear when these measures would take effect and for how long they could help fill the gaps created by the war.
Rachel Ziemba, a research associate at the Center for a New American Security, says much depends on whether the war comes to a quick conclusion or continues for weeks or even months, with the possibility of further escalation.
So far, neither the United States, Israel nor Iran have suggested they are willing to stop the war anytime soon, although Trump told CBS News on Monday that “the war is virtually complete,” comments that helped ease some of the swings in oil and stock prices.
“If the war continues, we would see oil prices not only remain elevated, but perhaps rise even higher as markets anticipate a longer disruption,” Ziemba said. “There is also the question of when it will end, how much damage will be caused to infrastructure and how quickly supplies could become available again.”
Initial polls have suggested the war is unpopular in the United States, and a Quinnipiac University poll released Monday found that 53 percent of voters who responded oppose Trump’s military action in Iran, including 60 percent of political independents.
That lack of popular support could represent a political headache for Trump and his Republican Party if voters associate the war with rising prices. Trump has so far largely dismissed concerns about the war’s possible impact on the rising cost of living.
“Near-term oil prices, which will fall rapidly when the destruction of Iran’s nuclear threat ends, is a very small price to pay for the security and peace of the United States and the world,” Trump said in a Truth Social post on Sunday. “ONLY FOOLS WOULD THINK DIFFERENTLY!”
