The Journal. - Will Gas Prices Go Up Because of the Iran War?

Episode Date: March 4, 2026

The conflict with Iran has raised energy prices and sent shock waves through markets. WSJ’s Rebecca Feng explains what’s happening in the Strait of Hormuz, an Iran-controlled waterway through which a fifth of the world’s oil supply typically travels. And WSJ’s Harriet Torry breaks down what this could mean for consumers and inflation in the U.S. Jessica Mendoza hosts. Further Listening: - Trump’s Shifting Reasons for War With Iran - Trump's 'Donroe Doctrine' on Foreign Policy Sign up for WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

In the hours after the U.S. and Israel began striking Iran on Saturday, a message was broadcast to ships in a critical waterway. From now on, all navigating through the Strait of Hormuz is forbidden. No ship in every time is not allowed to pass from Esterat of Hormuz until next notice. It's saying that the Strait of Hormuz is closed and basically warning that the vessels not go through. Roughly a fifth of the world's oil supply moves through the Strait of Hormuz on a normal day. It's the main way Saudi Arabia, Kuwait, Iraq, the UAE and Iran

get oil out to the rest of the world. Here's our colleague Rebecca Fung. That was like the initial warning, seemingly from Iran not to enter the strait. And what was your initial reaction when you heard the warning? Very, very bad. That was my reaction, because closing it is like the doomsday scenario. So my first reaction is like, oh no, here we go. After ships were banned from moving through the strait, much of the world's oil supply became stuck around the Persian Gulf.

Since the conflict began over the weekend, world prices have jumped. Yeah, it's very dramatic. Oil and gas prices spike today. U.S. oil traded 7.6% higher at $72 and $12. 12 cents per barrel, while International Standard Brent was up 8.6% at $79.11 cents per barrel. Growing fears of prolonged war, sending the stock market tumbling and oil prices surging. If things don't resolve soon in this conflict, what could it mean for the world oil market and the global economy? It could be pretty disastrous.

Oil prices are massively important for the global economy. And it has knock-on effects on consumer behavior and everything because it affects prices of the pump. So if that goes up, then transportation, manufacturing, logistical costs all go up. And inflation goes up as well. Welcome to The Journal, our show about money, business, and power. I'm Jessica Mendoza. It's Wednesday, March 4th.

Coming up on the show, will the Iran war show up at your gas pump? Rebecca says that since the Iran conflict broke out, she's been talking to a lot of nervous oil traders and brokers. I was talking to this one trader, and then he was like, oh, I went into the office at 11 p.m. on Sunday. I stayed all the way until Monday night because he just needed to be there. And then, like, when I was looking for people to comment on this, it was never easier to find people who are working.

Traders are working nonstop because they're trying to figure out, just how bad this conflict and the closing of the Strait of Hormuz could be for oil prices. On a typical day, that straight handles 20 million barrels a day, 20% of the world's daily oil supply. So on the typical day, it's very busy. Basically, like, in peacetime, there are around 140 daily crossings on average at that straight, and then some of it are like massive oil tankers. These are like skyscrapers-sized oil tankers. So, yeah, it's a very much. a very, very busy port. But after that radio message went out to ships in the area, traffic through the strait started to slow.

Oman's maritime security center says an oil tanker has been attacked in the street of Hormuz. On Sunday, Iran attacked three commercial vessels around the Strait of Hormuz, killing one seafarer. You know, after Sunday, traffic further slow just because that's like very, very big warning to any. anyone wanting to pass through the straight, which is the message is basically like, don't do it because we could attack you. Then on Monday, several international insurers said they were canceling some coverage for ships sailing near Iran, at least temporarily, to negotiate at higher prices. It's basically like a move that they're canceling these specialized policies that cover vessels

at high-risk waters. And basically if you want to sell, then you will sail without insurance. So that just basically slow traffic to a trickle. Iran's Revolutionary Guard has since threatened ships that attempt to pass through the Strait. A senior official with Iran's Revolutionary Guards said the Strait is closed, and if anyone tries to pass, Iran will quote, set those ships ablaze.

So I think that's as official as it gets. Ships are afraid, so effectively it's paralyzed. As of this morning, at least eight tankers have been attacked near the Strait. President Trump is trying to help get ships through the strait. On social media yesterday, he said the U.S. would provide insurance for ships. And he said if necessary, the U.S. Navy would begin escorting tankers through the strait, quote, as soon as possible. Beyond slowing the distribution of oil through the Strait of Hormuz, the conflict is also affecting the production of oil and gas.

On Monday, Iran directly attacked its Middle Eastern neighbors, hitting some important energy infrastructure. There was a hit in Qatar. An attack on the Rass-Lafan export hub. This is a major, major part of Qatar's economic apparatus. These are serious disruptions to the energy supply globally. So Qatar actually halted production of liquefired natural gas after intercepting to Iranian drones, targeting its energy facility in Rasslafan.

and that had a very, very immediate effect on natural gas prices in Europe. Like, I remember seeing the announcement from Qatar Energy and then at the same time seeing European gas prices shot up by 50%. So that was quite scary. So it was immediate? It was pretty immediate. That same day, Iran hit Saudi Arabia. The latest Iranian drone struck an Aramco oil refinery in Saudi Arabia.

There's another drone attack on Saudi Arabia, which caused a fire and kind of forced the state oil company there, Saudi Aramco, to halt productions at a refinery in Rastanura oil complex. This one is located on Saudi Arabia's Persian Gulf Coast. And it's sort of the kingdom's core departure point for crude exports to Asia and, like, just central to global oil supplies. So it's also kind of like this cornerstone of the kingdom's energy sectors. Rastanur's loading terminal and refinery complex was targeted by an Iranian drone again today, but didn't cause any damage, Kingdom officials said. According to Wall Street Journal reporting, Saudi crown prince Mohammed bin Salman had set attacks on the kingdom's oil facilities as a red line.

Previously, Saudi Arabia has always kind of exercised pretty strict restraint when it comes to entering conflicts. So now it's just been pushed into, like, closer and closer to direct military retaliation against Iran. Saudi Arabia has not directly retaliated this far. What is the status overall now of energy production and movement in the Middle East? When it comes to the Strait of Hormuz, I think the latest we've got there is just that currently there are more than 3,000 vessels

stuck in the Persian Gulf ports, kind of waiting to move across the straight. That's not good. What about Qatar and Saudi Arabia? What do we know about the extent of the damage to their energy sites? That's unclear. The two sides being hit, none of them have started production again, because they all just halt production. We haven't got a message saying that they restart.

And I guess it depends on the degree of the damage. It might take a while for them to, you know, come back to 100% production. So it just seems to me that there will be supply disruptions and supply shortage, frankly, like when it comes to global oil and gas supply. As of today, Brent crude prices, the global benchmark for oil, are at $81 a barrel. Before the conflict began, they were at $73. So far, Brent prices jumped quite a bit, but to be honest, not as much as analysts. had previously said. Still, the traders and brokers Rebecca talked to

are worried about the future. So now, like, I think the oil market is definitely scared, and everyone's just waiting for further developments like everyone's glued to their phone, watching the news and everything. So how concerned should consumers be about rising prices? That's after the break.

Can you just introduce yourself, please, and tell us what you cover? Yeah, my name is Harriet Torrey. and I cover the U.S. economy. I called up our colleague Harriet to understand how the war in Iran is affecting U.S. consumers. Americans, no doubt,

have a lot of questions about the Iran conflict, but a big one is is this going to make life more expensive? So how much does the global price of oil factor into affordability here? It's definitely an issue. It's not as big an issue

as it might have been in the past. In the 1970s, there were two, major recessions that were caused in part by oil price shocks. But since then, you know, the U.S. economy has changed a great deal. It's much less dependent on oil from the Middle East. The U.S. is actually now a net energy exporter. That's largely thanks to fracking. So the U.S. is technically energy independent. But at the same time, you know, the price of oil is global. This is a global market. And when there are constraints on oil supply, it does have an impact. That impact on prices is likely to be felt more in Asia and Europe, which are more dependent on energy from the Middle East.

How quickly does oil prices jumping up in the global market affect gas prices in the U.S.? It's a good question because, you know, of course it takes time for, you know, a barrel of oil to arrive at a refinery, get cracked into gasoline or diesel, and then, you know, enter the U.S. supply chain. So it shouldn't happen overnight, but a big part of oil prices, of course, a sentiment. So when we do see these big upsets in oil supply in the Middle East and, you know, these concerns about shipping lanes not being open and facilities going offline, that does cause a sentiment shock. But, you know, economists say that what we're seeing now is probably just the outset, like it will take time for all of these different factors to work their way through oil prices. As of today, the average price.

of gasoline in the U.S. is at $3.20, 301 cents higher than a month ago, according to AAA. That's still well below the surge that happened at the beginning of the war in Ukraine, which was the last major spike. Then, the average price of gas across the U.S. was over $5. Still, Harriet says Americans are very attuned to the price of gas. People spend more than 30%, you know, about a third of their income on housing, and they spend about 14% on food. They only spend about 3% on gas. It's actually a very small amount of your monthly spending

across the board. And then perhaps another 3% will be spent on other energy services like electricity and natural gas and so on. So this is actually quite a small part of Americans' day-to-day spending, but because it's such a visible part, people are just very aware of gas prices because you drive around all day and you see them everywhere you go. So when they go up, you think, oh, yeah, okay.

why is that happening? And swings and gas prices do you have an impact and on the way that people feel about their ability to continue spending? Also, it's not just about the price of gas at the pump. The cost is baked into basically all consumer goods. So when gasoline prices increase, that has an impact on inflation.

You know, analysts estimate that a $10 increase in the price of a barrel of crude oil will push up gasoline prices by 10 or 50. 15 cents a gallon. And then economists say that a 5% increase in oil prices will raise year-over-year inflation measures by about 0.1 percentage point. So these were all quite small sounding increases in isolation. But when they start to pile up, they can add up. Can you give some examples of that? So for instance, let's say, you know, most food is driven around in trucks and shipped in trucks. And if we see a big increase in the price of diesel or in the price of gasoline, the cost of shipping will increase.

And that will, of course, be reflected in higher prices at the grocery store. So grocery prices go up or higher fuel prices often has a big impact on airline ticket prices. So maybe we'll see an increase in that. So the longer that this lasts, the more it can sort of spread through the economy and push up prices overall. So what is the worst case scenario here? Well, the analysts that I've spoken to about this have said that probably the worst case scenario is if we continue to see a huge amount of volatility, you know, oil prices go up to sort of $100 a barrel. That would really hurt American consumers. We would see a big increase in inflation that would make life more difficult for the Fed. Certainly rate cuts would be perhaps a, you know, a more difficult proposition in that circumstance. And inflation has been very difficult sort of tiger to try and vanquish these past couple of years. So that would be tough, and the concern is that a big oil price shock and inflation could really hurt the U.S. economy and hurt consumers and hurt the labor market. Harriet, you're painting what could be a pretty dim picture for the economy, but is there any upside to higher oil prices?

Well, so there are always winners and losers from these types of situations. So for consumers, really, there's not much upside at all for prices going up. But on the flip side, if you're an energy-producing company, let's say in Texas or in New Mexico, then you're in a situation where this is beneficial for those companies there. They can sell their products at higher prices. And so there's that impact that, you know, maybe this helps economic growth. So it's sort of a double-edged sword for people in America. U.S. Secretary of State Marco Rubio told reporters on Capitol Hill on Monday

that the U.S. had plans to offset oil price increases. There is a plan in place. anticipated this could be an issue, and Secretary Wright investment will begin to roll out those steps starting tomorrow to mitigate, to mitigate against the impact that could have. On Tuesday, in a bilateral meeting with German Chancellor Friedrich Meertz, President Trump was asked about the war's economic impact. Mayer said that the war is, quote, damaging our economies.

Trump responded, If we have a little high oil prices for a little while, but as soon as this ends, those prices are going to drop I believe lower than even before. Trump has been talking a lot lately about making life more affordable for Americans. Did that job just get harder with this war? It's hard to say at this point

because we don't know if this jump in gasoline prices is going to be sustained or if this might just be a short-term blip that, you know, fades. It is obviously something that the administration is concerned about. American consumers for five years have been dealing with inflation that's been above the face. Federal reserves 2% target, and in some cases, very far above that target. And it's still not entirely back down.

Prices haven't gone into reverse. They are still much, much higher than they were a few years ago. And many people just feel the pain. But, you know, it is a difficult situation because really nobody knows how this is going to play out. That's all for today, Wednesday, March 4th. The Journal is a co-production of Spotify and the Wall Street Journal. Additional reporting in this episode by Benoit Falkan, Georgi Conchev, Costas Paris, and Somersailles.

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