Key takeaways:
- U.S. gasoline prices surged sharply due to escalating tensions with Iran, with the national average reaching $3.48 per gallon and diesel prices rising to $4.66 per gallon; California had the highest gas prices at $5.20 per gallon.
- Crude oil prices experienced volatility, initially spiking near $120 per barrel due to disruptions in the Strait of Hormuz but later falling below $95, amid ongoing military conflict and geopolitical instability.
- Analysts predict sustained high fuel prices through summer due to supply uncertainties and seasonal demand, while international markets fluctuated and major economies discussed coordinated responses to stabilize energy markets.
U.S. gasoline prices surged sharply amid escalating tensions and military conflict involving Iran, pushing crude oil prices above $100 per barrel for the first time since 2022. On Monday, the national average price for regular gasoline reached $3.48 per gallon, marking an increase of 48 cents from the previous week and 58 cents from a month earlier, according to AAA data. Prices were highest in California, where drivers paid an average of $5.20 per gallon, while Kansas reported the lowest average at $2.92 per gallon. Diesel prices also rose significantly, climbing nearly 89 cents over the past week to $4.66 per gallon.
The spike in fuel costs followed a brief surge in crude oil prices, with West Texas Intermediate (WTI) and Brent crude reaching nearly $120 per barrel early Monday. However, prices retreated later in the day, with WTI settling at $94.77 before dropping below $85, and Brent crude falling to just under $95. This volatility was driven by disruptions in oil flow through the Strait of Hormuz, a critical maritime passage connecting the Persian Gulf to the Arabian Sea, which has been affected by the ongoing conflict. President Donald Trump indicated that the U.S. is making significant progress in the military operation, describing the conflict as “very complete” and suggesting it could end soon.
The geopolitical instability has prompted concerns about sustained high fuel prices. Analysts from JPMorgan Asset Management and Eurasia Group forecast that gasoline prices could remain elevated through the summer due to increased seasonal demand and ongoing supply uncertainties. David Kelly, JPMorgan’s chief global strategist, noted that prices might stay high even if oil production resumes quickly. Meanwhile, Patrick De Haan of GasBuddy suggested that if oil prices continue to decline, the likelihood of gasoline reaching $4 per gallon diminishes, predicting prices will stabilize between $3.50 and $3.65 per gallon.
Internationally, stock markets experienced significant fluctuations in response to the conflict and oil price swings. U.S. equity indices, including the S&P 500 and Nasdaq Composite, reversed earlier losses to close higher Monday, while Asian and European markets saw declines, with Japan’s Nikkei 225 falling 5.2% and South Korea’s Kospi dropping 6%. Finance ministers from major industrialized nations convened via video conference to consider coordinated measures to stabilize energy markets, including a potential joint release of oil reserves. However, no immediate action was taken. The International Energy Agency highlighted the deteriorating market conditions, citing transit challenges through the Strait of Hormuz and substantial production cuts by countries such as Kuwait and the United Arab Emirates. Analysts warn that further supply reductions and storage capacity constraints could exacerbate the situation if the conflict persists.
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