President Donald Trump’s remark about potentially targeting Iran’s oil infrastructure has led to a spike in both oil and gasoline prices, as traders assess the risks of a conflict that might further disrupt global energy supplies.
Last Friday, Trump ordered strikes on military sites located on Iran’s Kharg Island, which is a critical hub for oil in the Persian Gulf, housing the country’s largest oil terminal. Over the weekend, he highlighted the possibility of further bombings aimed at the island’s oil facilities.
He mentioned, “You can do it with five minutes’ notice; it’s all locked and loaded and ready to go if you want to do it,” adding that the U.S. previously chose not to proceed with such actions. “We chose never to do it again. We’ll see what happens,” he said while speaking to reporters aboard Air Force One.
Kharg Island, about 55 miles from Bushehr province, may not be very large—comparable in size to New York City’s Central Park—but it plays a crucial role in Iran’s economy. It has the capacity to load around 7 million barrels of oil per day, and a significant 90% of Iran’s crude exports pass through this island, primarily heading to markets in China and India.
On Monday, traders were on high alert, fearing that ongoing hostilities could disrupt exports from the Persian Gulf, including the vital Strait of Hormuz, which is essential for global energy traffic. This uncertainty pushed oil prices above $100 a barrel for the first time since 2022, with rising crude prices beginning to affect consumers directly.
The American Automobile Association (AAA) reported that the national average for regular gasoline reached $3.70 a gallon as of March 16, showing a rise of 77 cents from the previous month. Diesel prices surged as well, climbing to $4.97, which is an increase of $1.31 in the same time frame.
Interestingly, the price hikes haven’t been uniform across the U.S. The states with the lowest averages included Kansas, North Dakota, and Oklahoma, where prices ranged from $3.08 to $3.14, contrasting sharply with higher averages in California, Hawaii, and Washington.
According to Patrick de Haan from GasBuddy, “Americans today will spend $275 million more on gasoline compared to before the U.S. attack on Iran, totaling nearly $2.5 billion since it began.”
Fuel prices seem to be influencing other areas too. The Argus US Jet Fuel Index, which provides a daily average of prices from key cities, rose to $3.88 a gallon last Friday after remaining mostly in the $2 range for quite some time.
If fuel prices keep increasing, it might have a cascading effect on the economy, potentially raising costs for airlines, trucking companies, and other transportation-dependent businesses. This means that consumers could also face tighter budgets as inflation continues to be a pressing concern.
The trajectory of events will likely hinge on whether the conflict escalates further and how oil infrastructure and key shipping routes might be impacted. With these risks in mind, the White House is exploring protective measures for commercial vessels navigating the Strait of Hormuz, including the use of emergency oil reserves to mitigate the economic fallout.
Before heading to Mar-a-Lago on late Friday, Trump indicated that the U.S. Navy might soon start escorting tankers through the Straits.
