Middle East Tensions Could Send Gas Prices Soaring Above $3 Per Gallon

Energy markets are bracing for potential volatility next week following recent U.S. and Israeli military actions in the Middle East. Oil prices have already climbed to seven-month highs, and experts warn gas prices could surge well above $3 per gallon if regional oil supplies face disruption.

Energy markets are preparing for potential turbulence in the coming week as recent U.S. and Israeli military operations create uncertainty around Middle Eastern oil production and distribution.

Market analysts had previously outlined two potential outcomes before the latest escalation with Iran: a brief price increase that would settle down if shipping lanes and critical infrastructure like Iranian pipelines and the Kharg island facility remained operational. Conversely, more significant and sustained price increases would occur if oil facilities or supply chains faced interruption, particularly if tanker movement through the Strait of Hormuz encountered problems.

Energy markets have already responded to conflict concerns, with Brent crude reaching $72.87 on Friday, marking the highest level in seven months.

Iran currently ships approximately 1.6 million barrels daily, with the majority heading to China through private refineries that show less concern about U.S. sanctions restricting Iranian oil sales to other markets. Should this supply face disruption, Chinese buyers would need to source oil from alternative global suppliers, which could push prices higher.

The Strait of Hormuz presents another critical factor, as this waterway handles 20% of daily global oil movement. Major Middle Eastern producers including Saudi Arabia, Iraq and the United Arab Emirates route most of their shipments through this passage. However, energy experts suggest Iran lacks motivation to block the strait since doing so would eliminate its own export capabilities and damage relations with China, its primary customer.

Rystad Energy projected in pre-conflict analysis that targeted strikes against Iran’s nuclear facilities and Revolutionary Guard that stop short of regime change or full-scale warfare could trigger $5-$10 price increases driven purely by market anxiety.

A broader conflict that includes Iranian interference with tanker operations could push crude beyond $90 per barrel and drive U.S. gasoline costs “well above” $3 per gallon, according to pre-conflict projections from Clayton Seigle at the Center for Strategic & International Studies. AAA data shows U.S. gas prices averaged $2.98 per gallon during the previous week.