The US-Iran war: oil prices, gas prices and the market fallout

Oil prices plunged below $95 a barrel and stock markets rallied when Trump announced a ceasefire with Iran in April.^[13] At the end of the month, after he extended a US blockade of Iranian ports, oil briefly topped $126 a barrel, its highest price since 2022.^[3] In early May, regular gasoline averaged $4.54 a gallon, more than 50% higher than before the war.^[14] When the United States and Iran announced a preliminary deal to end the war in June, oil fell to its lowest level since March, according to reporting at the time.^[4]

In July, after Iran attacked three ships near the Strait of Hormuz, the Treasury revoked a two-month waiver, granted under the preliminary deal, that had let Iran export oil.^[15] Oil prices jumped and stocks fell after Trump said the ceasefire with Iran was "over."^[16] In August, Treasury Secretary Scott Bessent launched what the administration called Operation Economic Outcast, pressing other countries to stop oil, energy and business deals with Iran.^[7]

By early September, diesel averaged $5.78 a gallon, up more than 53% since the war began in late February.^[5] Consumer prices in August were 3.4% higher than a year earlier.^[6] Trump said oil prices would probably not come down until after the midterm elections.^[17] In late September, rising gas prices and mortgage costs added to the political pressure on him as the midterms neared.^[18] By the end of September, reporting described a recovery in Gulf crude exports as producers found alternative routes and some shipping through Hormuz resumed. Reports differed on how close flows were to prewar levels, while refined products such as diesel remained constrained.^[19] In early October, reporting described British discussions with European allies about emergency diesel releases as Trump threatened to restrict US diesel exports.^[8]

In October, Trump signed an executive order easing limits on the tax-free use of red-dyed diesel, which experts said would offer little relief,^[20] and he blamed Democratic-run states such as California and Ukraine's strikes on Russian refineries for high fuel prices.^[21] Brent crude rose back above $104 a barrel,^[22] then fell after Trump pledged not to attack Iran before the midterm elections.^[23] The Strait of Hormuz was no longer paralyzed, yet fuel prices stayed high:^[24] Moody's Analytics chief economist Mark Zandi estimated that the war had cost the average American household about $2,000.^[25] The effects reached beyond the United States: in Britain, figures released in October showed inflation rising to 3.5%, its highest level in almost a year, as the war drove up fuel prices.^[26] On October 22, Brent crude rose above $114 a barrel, a five-month high, amid fears that the United States would renew strikes on Iran,^[27] and AAA said crude prices above $100 were keeping US gas prices from falling faster.^[28] A New York Times/Siena poll found that 73% of voters disapproved of Trump's handling of gas prices.^[29]

Brent rose above $115 on October 23 on fears of renewed US strikes, its highest level in more than five months,^[30] then swung with reports of diplomacy.^[31][32] Regular gasoline averaged $3.472 a gallon in Trump's second term by late October, a fraction of a cent above the $3.471 under Biden, according to AAA data.^[9] Trump said gasoline was cheaper than under Biden and Obama, a claim that Election Day data did not support, the Washington Examiner reported.^[33] Chevron and Exxon Mobil reported large third-quarter profits on higher diesel prices.^[34] After the midterm losses, Trump and Vance blamed the war for the rout, and oil fell sharply on November 4, according to Axios;^[10] it then rebounded as traders turned back to the Middle East after the US strikes on Iran.^[35] On November 10, Brent dropped below $90 a barrel after Trump's comments about Iran.^[36] Two days later oil jumped, with Brent briefly reaching $94, after Trump said the United States did not need a deal with Iran.^[36]