Rising oil prices after Iran strike could increase US gas prices, experts say

(NEW YORK) — Oil prices climbed more than 3% on Tuesday in the immediate aftermath of an Iranian missile attack on Israel.

The spike in prices is expected to push up the price of U.S. gasoline, experts told ABC News.

Drivers could face a price increase of between 10 and 15 cents per gallon, experts estimated. The national average price of a gallon of gas currently stands at $3.20, AAA data showed.

A further escalation of the conflict between Israel and Iran could send oil and gas prices significantly higher, said Ramanan Krishnamoorti, a professor of petroleum engineering at the University of Houston.

“Clearly this will have a huge impact on gas prices,” Krishnamoorti told ABC News. “There’s no doubt about that.”

Iran said the attack on Tuesday was retaliation for a wave of assassinations carried out by Israel over the last several weeks targeting Hezbollah leaders. Israel will have a “significant response” to Iran’s attack, an Israeli official told ABC News.

While sanctions have constrained Iranian oil output in recent years, the nation asserts control over the passage of tankers through the Strait of Hormuz, a trading route that facilitates the transport of about 15% of global oil supply.

Passage through the Suez Canal, another important shipping route for crude oil, could be impacted by further attacks, as happened with Yemen-based Houthi attacks on freight ships earlier in the war, Krishnamoorti said.

Despite a recent uptick, the price of oil stands well below a 2022 peak reached when the blazing-hot economic rebound from the pandemic collided with a supply shortage imposed by the Russia-Ukraine war. Gas prices, meanwhile, have plummeted in recent months.

The U.S. set a record for crude oil production in 2023, averaging 12.9 million barrels per day, according to the U.S. Energy Information Administration, a federal agency.

The surge in U.S. production would help limit the impact of a possible supply disruption, though oil prices are set on a global market, where a major supply shock could not be entirely accounted for with U.S. oil output, Timothy Fitzgerald, a professor of business economics at the University of Tennessee who studies the petroleum industry, told ABC News.

“This is less troubling than it would’ve been a generation ago,” Fitzgerald said. “Today, we export more crude oil than we import.”

If both sides deescalate, the price of crude oil could quickly drop back to where it stood before the Iranian attack on Tuesday, Fitzgerald added.

“There would be no lasting importance of that,” Fitzgerald said.

The rise in oil prices comes at a relatively quiet period in the U.S. gasoline market. Drivers have enjoyed a sharp decline in gasoline prices over recent months, in part due to sluggish demand for gas as the busy summer traveling season has given way to an autumn slowdown.

Still, a regional war in the Middle East could upend the market and spike prices, experts said.

Republican Sen. Lindsey Graham of South Carolina condemned Iran’s missile attack on Israel, calling it a “breaking point” on Tuesday and urging President Joe Biden’s administration to respond.

Graham called for oil refineries to be “hit and hit hard” and said his prayers are “with the people of Israel.”

President Joe Biden and Vice President Kamala Harris are monitoring the Iranian attack from the White House Situation Room. Biden directed the U.S. military to aid Israel’s defense against Iranian attacks and shoot down missiles.

ABC News’ Allison Pecorin and Jordana Miller contributed to this report.

Copyright © 2024, ABC Audio. All rights reserved.