Oil prices increased by more than 3% on Tuesday following an Iranian missile attack on Israel, causing concerns about rising U.S. gasoline prices. Experts predict that drivers may face a price hike of 10 to 15 cents per gallon, with the national average currently at $3.20, according to AAA data.
The escalation of conflict between Israel and Iran could further elevate oil and gas prices, as noted by Ramanan Krishnamoorti, a petroleum engineering professor at the University of Houston. “This will have a significant impact on gas prices,” he stated.
Iran launched the attack as retaliation for a series of Israeli assassinations targeting Hezbollah leaders. An Israeli official warned of a “significant response” to the missile strike.
Despite sanctions limiting Iranian oil production in recent years, Iran controls key shipping routes like the Strait of Hormuz, which is vital for transporting about 15% of the global oil supply. Disruptions could also affect the Suez Canal, as seen in previous attacks by Yemen’s Houthi forces on freight vessels.
While oil prices have risen recently, they remain below the peak reached in 2022 during the economic rebound from the pandemic and the supply shortages caused by the Russia-Ukraine war. The U.S. has seen record crude oil production in 2023, averaging 12.9 million barrels per day, which could mitigate some impacts of potential supply disruptions. Timothy Fitzgerald, a professor of business economics at the University of Tennessee, noted, “Today, we export more crude oil than we import,” making the situation less concerning than it would have been in the past.
If both parties can deescalate tensions, crude oil prices may quickly return to pre-attack levels, according to Fitzgerald.
The rise in oil prices comes during a relatively calm period for U.S. gasoline markets, where prices have dropped significantly in recent months due to decreased demand as the summer travel season ends. However, experts warn that a regional war in the Middle East could disrupt the market and lead to price spikes.
In response to the Iranian missile attack, Republican Sen. Lindsey Graham of South Carolina labeled the incident a “breaking point” and urged the Biden administration to take action. He called for severe repercussions against oil refineries and expressed support for Israel. Meanwhile, President Joe Biden and Vice President Kamala Harris are closely monitoring the situation from the White House Situation Room, with Biden directing U.S. military support to assist Israel’s defense against Iranian threats and to intercept missiles.