A two-week ceasefire brokered by the Pakistani government has temporarily halted hostilities between the U.S., Israel, and Iran, coming just before President Trump’s deadline for Iran to reopen the strategic Strait of Hormuz waterway.
The conflict had disrupted between 10% and 20% of global oil supplies, contributing to record-high fuel prices worldwide. U.S. drivers experienced some of the most expensive gas prices on record following American and Israeli strikes on Iran’s oil-rich facilities.
According to AAA’s price tracker, the national average for regular gasoline reached $4.16 per gallon on Wednesday, representing over a 20% increase from the previous month. This level matches prices seen only once before during the past decade – when Russia’s invasion of Ukraine in 2022 pushed averages to an all-time high of $5 per gallon.
Energy analysts caution that even if the ceasefire leads to a permanent resolution, consumers should not expect immediate relief at the pump. Andrew Lipow of Lipow Oil Associates notes that damaged energy infrastructure requires significant time to repair, meaning supply disruptions could persist for weeks or months.
The phenomenon described as ‘gas prices go up like a rocket and fall like a feather’ remains relevant, according to Mark Zandi of Moody’s Analytics. When Russia invaded Ukraine in February 2022, gas prices increased from $3.60 to $4.20 per gallon in just one month – a nearly 17% jump – but took until November to return to pre-war levels despite being the aggressor and major oil exporter in that conflict.
Lipow explains that while high oil prices typically trigger economic contractions that would cause gas prices to drop sharply during recessions, absent such downturns he does not anticipate national averages falling below $3 per gallon in the near term.
Analysts warn that widespread destruction of Iranian oil infrastructure will require considerable time to rebuild, meaning gasoline prices may remain elevated as supplies work to return to pre-conflict levels. The Strait of Hormuz closure has introduced what experts describe as a ‘sizable risk premium’ in oil pricing that Zandi suggests could persist for months or even years.
This risk premium manifests through practical concerns: fewer oil tankers may be willing to navigate the strategically important waterway, and those that do face higher insurance costs. Both factors contribute to sustained elevation in oil prices for the foreseeable future.
As Patrick De Haan of GasBuddy observes, ‘The market is going to remember,’ suggesting that trading behaviors in the region may exhibit market ‘PTSD’ effects even after physical infrastructure is restored.
For this story, generative AI was utilized as a research aid, with editorial verification of all AI-generated content prior to publication.