Both crude oil benchmarks, the West Texas Intermediate (WTI) and Brent, jumped by over 15 percent as markets opened Sunday evening, touching levels not seen since the early months of Russia's 2022 invasion of Ukraine.
US President Donald Trump, however, dismissed the spike as a "small price to pay" to eliminate Iran's nuclear threat, reiterating the White House's insistence that the rise is temporary.
"Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and World, Safety and Peace," he wrote on social media Sunday evening.
"ONLY FOOLS WOULD THINK DIFFERENTLY!" he argued.
Maritime traffic in the Strait of Hormuz -- through which 20 percent of global crude and gas passes -- has all but halted since the war began on February 28.
Oil and gas producers around the Gulf have meanwhile begun to decrease output, while Israeli strikes on fuel depots in Tehran have raised fears of retaliatory attacks on neighboring countries' infrastructure.
Soaring crude prices have already translated into rising costs at the fuel pump in the United States, a highly sensitive political issue heading into midterm elections in November.
- 'No energy shortage' -
Earlier Sunday, Trump's energy chief Chris Wright argued that disruptions would be short lived.
"Worst case, that's a few weeks. That's not months," the US energy secretary told CNN.
"They shouldn't go much higher than they are here because the world is very well supplied with oil," he added to CBS. "There's no energy shortage in all of the Western hemisphere."
He said the United States was now talking with shipping companies eager to get their vessels out of the Gulf.
"Early tankers probably will involve some direct protection by the US military" to get through the Strait of Hormuz, he said, adding that he thought traffic would return to normal "relatively soon."
Iran accounts for about four percent of world oil production, according to the US Energy Information Administration.
Its oil industry is subject to international sanctions but some is still exported, mainly to China, oil industry data shows.
US Treasury Secretary Scott Bessent said Friday that the government was considering lifting sanctions on more Russian oil, a day after it temporarily authorized India to buy from Moscow as global oil prices surged.
The US International Development Finance Corporation also said Friday that it was creating a reinsurance mechanism of up to $20 billion to cover risk associated with travel through the Strait of Hormuz.
Rising US fuel prices risk sparking domestic wildfire for Trump
Washington, United States (AFP) Mar 7, 2026 -
Sean Robinson, a 54-year-old schoolteacher in the US capital Washington, did not realize how high gas prices had gotten until he arrived at the pump on Friday.
"That is a sizeable jump," he told AFP, pointing to a neon sign showing $3.27 for a gallon of regular gasoline.
Robinson is among US consumers feeling the sting of a cost surge sparked by the US-Israel war on Iran, which sent oil prices soaring as Tehran effectively blocked the Strait of Hormuz after being attacked.
But the price hike comes at a politically sensitive time for President Donald Trump as midterm elections approach, hitting voters hard.
Expensive gasoline could also prompt the independent central bank to put the brakes on the world's largest economy as it battles stubborn inflation.
Since last week, US average domestic fuel prices have risen 11 percent, according to the AAA's fuel price gauge.
It is the kind of move that Robinson said will have him cutting down on all but the essentials.
"It just determines what I'm going to do on a day-to-day basis," he said. "Pretty much start thinking about (watching) Netflix, staying in the house instead of burning gas."
Others at the gas station agreed.
"It impacts all areas of life," said Toloria Washington, 39. "We are in a state of survival mode."
- 'It's the basics' -
Washington, who works in finance, said fuel expenses are non-negotiable for her. With prices rising at the pump, she had to make cuts elsewhere.
That, she said, is a problem for people already battered by years of high prices post-pandemic.
"That's the key thing, it's tapping into everybody's basics," she added. "It's the basics. Daily survival of food, water, housing."
US inflation hit a peak of 9.1 percent during the pandemic. While it has cooled since then, analysts warn of risks of another pick-up.
"Inflation showed signs of accelerating prior to the jump in energy prices," said KPMG chief economist Diane Swonk.
"That has left consumers in a sour mood," she added.
Swonk warned that rising fuel prices added "insult to injury" for low-income Americans, who are already seeing higher healthcare costs and a tightening of welfare benefits under Trump.
Trump, who has bragged about oil prices falling during his term, sought to address the political fallout on Friday, telling CNN he expected prices to come down quickly.
His Republican party holds only a slim majority in both the House and Senate.
With midterm elections due in November, he will be hoping that voters do not let tightening household budgets weaken his political position.
- Fed's 'dueling mandate' -
Trump could see further complications if inflation from gasoline price hikes pushes the Fed to respond by keeping interest rates at a higher level.
The central bank has a dual mandate of maintaining stable prices and maximum employment, but has one main tool to do so -- adjusting interest rates.
Raising them generally cools economic activity and reduces inflation while lowering them can spur activity, boosting the weakening employment market.
The prospect of more inflation due to oil prices raises the specter of what some analysts call a nightmare scenario.
"This could not come at a worse time for the Federal Reserve," said KPMG's Swonk. "It now has a dueling mandate with the risk that inflation not only lingers but accelerates."
Fed policymakers remain cautious.
Addressing higher domestic energy prices on Friday, Federal Reserve governor Christopher Waller told Bloomberg TV he considered them "unlikely to cause sustained inflation."
But this is scant consolation for many Americans hit by even a temporary bout of price increases.
"One thing after another, it's chaos, you know, every day," said Lucas Tamaren, 32, at a gas pump in Los Angeles.
"Living in America feels unpredictable and chaotic and it's hard."
Robinson, the schoolteacher, said he will be watching gas prices every day now. He expects price pressures will be reflected at the voting booth in November.
"The more you pay higher gas, higher groceries (costs)," he said, voters will "start to see" that the middle class is shrinking.
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