President Donald Trump says surging gasoline prices are a “very small price to pay” as the Iran war roils global energy markets, sending crude oil prices surging above $100 a barrel for the first time since Russia’s 2022 invasion of Ukraine.
The conflict has severely disrupted oil flows through the Strait of Hormuz, a key global trade route, increasing prices at the U.S. gas pump and threatening to undercut Trump’s economic agenda ahead of the November midterms.
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The President on Sunday dismissed concerns over rising crude prices as a temporary blip.
“Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and World, Safety and Peace,” President Donald Trump posted on Truth Social on Sunday evening. “ONLY FOOLS WOULD THINK DIFFERENTLY!”
Energy Secretary Chris Wright also appeared eager to reassure Americans that prices will soon fall. “Energy will flow soon,” Wright told Fox News on Sunday. “The unknown that this could be some long, you know, drawn-out crisis [has driven up prices]. But it won’t be.”
Oil shipping halted
Of the wave of retaliatory attacks that Iran has launched across the Middle East, its effective closure of the Strait of Hormuz—threatening to fire on any ship trying to pass—is a powerful weapon.
Shipping through the strait, a narrow waterway through which a fifth of the world’s oil supply passes, has all but ground to a halt. The strait is the only sea passage from the Persian Gulf to the open ocean.
Since the U.S.-Israeli strikes on Feb. 28, merchant ships passing through the strait have been attacked, while broader aerial attacks traded between the U.S., Israel and Iran also pose a threat to vessels passing through. Iran-linked vessels have been the only commercial ships that have transited through the strait over the weekend, according to Bloomberg. The last non-Iranian commercial ship to pass through Hormuz was a Chinese-owned bulk carrier on Saturday morning.
“In the whole written history of the strait, it has never been closed, ever,” JPMorgan Chase analyst Natasha Kaneva told the Wall Street Journal. “To me, it was not just the worst-case scenario. It was an unthinkable scenario.”
Last June during the 12-day war between Israel and Iran, Iran had also threatened to close the strait in retaliation for U.S.-Israeli attacks on its nuclear facilities. At the time, Peter McNally, Global Sector Lead at research firm Third Bridge, told TIME, “The world cannot replace all the oil that flows through the Strait of Hormuz, which remains the most critical chokepoint in global crude markets.”
More than 14 million barrels of crude flowed through the strait per day before its closure. Saudi Arabia has diverted shipments of oil to the Red Sea at record levels, although that route could also face challenges from potential attacks by the Iran-aligned Houthis in Yemen, who have targeted vessels in the area since 2023 to protest Israel’s bombardment of Gaza.
Oil refineries attacked, output reduced
With the strait effectively closed, some oil refiners are scaling back operations. Kuwait, the United Arab Emirates, and Iraq have reduced crude output as storage tanks have filled with backed up crude.
High gas price rises may not be as temporary as Trump and Administration officials have assured Americans they will be. Oil market analysts have suggested that even if the war ended today, it could take two weeks to restore maritime traffic in the Gulf to pre-war levels and two months to return oil production to normal levels.
Energy production facilities in the Middle East have also faced attacks, directly threatening the supply of crude. Oil refineries in Saudi Arabia, Qatar, Bahrain and Kuwait have blamed Iran for strikes in the last week. On Saturday, Israel carried out strikes on four oil storage facilities and an oil production transfer center in Iran, according to Iranian state media. Iran exports an average of 1.6 million barrels of crude per day, less than many of its neighboring Gulf states.
On Sunday, the Iranian Revolutionary Guard Corps threatened retaliatory attacks on energy sites across the region. “If you can tolerate oil at more than $200 per barrel, continue this game,” the IRGC warned the U.S. and Israel.
Qatar’s Minister of Energy Saad al-Kaabi told the Financial Times on Friday that Gulf producers will be forced to stop exports “within days,” which would drive oil prices even higher. “Everybody that has not called for force majeure we expect will do so in the next few days that this continues,” Al-Kaabi said.
On Monday, after Iran announced its new Supreme Leader, Bahrain’s state oil company declared force majeure, which releases it of its contractual obligations due to extraordinary circumstances.
And although China was previously better able to weather energy disruptions in the region, including receiving assurances from the Houthis in 2024 that they would not target Chinese vessels in the Red Sea, Beijing appears just as rattled as the rest of the world. The Chinese government directed its oil refiners to pause fuel exports last week, instead prioritizing domestic needs amid fears of a deepening global energy crisis.
Oil prices surge
Already surging oil prices across the U.S. could rise even higher, according to Patrick De Haan, a petroleum analyst. A second wave of price increases is expected in several Republican states that use price cycling systems, De Haan said, like Michigan, Indiana, Ohio, Kentucky, Texas, and Florida.
Despite assurances from the Trump Administration that the war will end within weeks, the widening conflict, skepticism over the U.S.’s plan, and Iran’s apparent unwillingness to negotiate a cease-fire have “forced traders to price in the possibility of a wider conflict,” De Haan wrote in a post on X.
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White House spokesperson Taylor Rogers previously told TIME that Trump has “a strong game plan to keep the energy market stable well before Operation Epic Fury began, and they will continue to review all credible options and execute on them when appropriate.”
Volatility in energy markets is also rippling through financial markets and rattling investors. As crude prices surged, equity markets across Asia and the rest of the world slumped, with South Korea’s Kospi and Japan’s Nikkei benchmarks sliding sharply on Monday.If supply disruptions around the Gulf drag on, the current surge in oil prices may prove more enduring than the spike that followed Russia’s invasion of Ukraine. Energy analysts say prolonged turmoil could amount to one of the most severe sustained energy crises since the 1970s, when Arab oil embargoes and the 1979 Iranian Revolution choked off global exports, sent crude prices soaring, and tipped Western economies into recession.
