The Iran War’s Impact on Gas and the Economy

With the ongoing War in Iran that started on Feb 28 of this year, students have begun to see major economic changes in their daily lives.

A large amount of the world’s oil supply passes through the Strait of Hormuz, which has been shut down, reopened, and shut down again since the war started.

Here’s what you need to know: 

The change in the price of gas can be attributed to 3 consequences of the war. First, the supply of oil drops and demand stays the same. Second, transporting oil is disrupted and creates an unsteady market, driving oil prices up. Third, gas is made from crude oil, so when crude oil prices go up, so does the price of gas. 

Shipping disruptions have been shown to slow down about 1/5th (about 20%) of the global oil trade. Before the war, crude oil prices averaged around $65 to $70 per barrel, but since the war in Iran, they rose to roughly $95 to $110 per barrel, with spikes reaching as high as $120 to $150. 

As gas prices rise, reaching around $4 per gallon or higher in some areas, students will likely have to spend more just to maintain their daily routines.

Students will also see inflation caused by rising energy costs. 

When fuel prices increase, the cost of transporting goods also rises, which leads to higher prices for groceries and other everyday items. Reports show that U.S. wholesale prices have increased significantly due to an 8.5% jump in energy costs that has contributed to overall inflation. 

While the War in Iran isn’t geographically close, its economic effects, like the rising gas prices, will have a significant impact on students here.