One-fifth of the world’s oil supply is effectively locked away due to Iran’s Strait of Hormuz blockade, and US oil prices are seeing no relief as the conflict stretches into its third week. Analyst Patrick De Haan projects Monday pump prices of $3.80 to $3.85 per gallon, with $4 gasoline still a possibility. The blockade, combined with strikes on key oil facilities, has created a supply crunch of historic proportions.
The current crisis was sparked on February 28 when the US and Israel launched their military campaign against Iran, triggering an immediate and sustained rise in global oil prices. In under three weeks, the national gasoline average has risen 23% from below $3 to $3.70 per gallon, placing significant financial pressure on American households. Each new development in the conflict has the potential to push prices even higher.
Friday’s US strikes on Kharg Island, the facility at the center of Iran’s oil export operations, dealt another blow to global supply. Iran’s closure of the Strait of Hormuz, through which about 20% of daily global oil supply passes, has significantly reduced available petroleum for international buyers. Brent crude ranged from $103 to $106 per barrel Monday, while US crude held near $94 after spiking briefly to $100 the day before.
The domestic price impact has been most concentrated in California, where averages have surpassed $5 per gallon and some Los Angeles stations are charging above $8. Diesel costs for trucking and freight companies could reach $5.15 per gallon nationally. Senior oil company executives, including Exxon’s Darren Woods and counterparts at Conoco and Chevron, have personally briefed White House officials on the escalating supply crisis and the inflationary risk posed by speculative trading.
Wall Street managed modest gains Monday as crude prices briefly retreated, with the S&P 500 rising about 1% in early trading. Major oil producer stocks have hit all-time highs since the conflict began, benefiting from the same elevated price environment that is squeezing consumers. The energy market crisis will only begin to resolve once a diplomatic or military resolution allows the Strait of Hormuz to reopen to international shipping.