Gas prices in the USA are back in the headlines in 2025 — and for good reason. As the military conflict between Israel and Iran intensifies, the global oil market is reacting fast. And American drivers are already feeling the impact at the pump.
According to AAA, the national average for a gallon of regular gasoline hit $3.43 this week, up from $3.11 just two weeks ago. Some states like California, Nevada, and Illinois are already averaging over $4.00. Analysts expect prices to continue climbing through July if tensions don’t cool soon.
So what’s causing the spike, and how high could prices go? Let’s break it down.
Why the Middle East Conflict Matters to U.S. Drivers
Iran is one of the world’s top oil producers and holds immense geopolitical influence due to its proximity to the Strait of Hormuz — a vital shipping lane through which nearly 20% of all global oil flows. Israel’s recent missile strikes on Tehran’s refineries and Iran’s threats to retaliate by closing the strait have alarmed global energy markets.
Traders are pricing in the possibility of supply disruptions, which automatically drives up futures contracts for both Brent Crude and U.S. West Texas Intermediate (WTI). Brent crude is currently trading near $75 per barrel, while WTI has jumped to around $72.
Even though the U.S. produces a significant portion of its own oil, American gasoline prices are still influenced by global markets. Refineries purchase oil at world prices, and supply chain logistics are tightly interwoven with international production.
What Analysts Are Saying
ING analysts said in a note Wednesday that “the biggest fear for oil markets is a closure of the Strait of Hormuz,” which could send crude prices soaring past $100. If that happens, U.S. gas prices could rise another 40 to 60 cents per gallon almost overnight.
Other analysts remain more measured. Goldman Sachs projected this week that oil prices could stabilize in the $80-$85 range barring further escalation, which would still mean another 10-20 cent jump at the pump for American consumers.
Either way, the message is clear: geopolitical tension equals price volatility.
Short-Term vs. Long-Term Effects
Short-term effects are already visible: prices are rising, futures contracts are volatile, and gas station owners are adjusting rates almost daily.
But the longer-term impact will depend on whether the conflict continues to disrupt oil supply chains or if diplomacy cools the situation. Historically, sharp increases in gas prices have also caused demand to dip slightly as consumers cut back on non-essential travel.
If Iran follows through on its threat to block oil flow through the Strait, we could see global crude inventories tighten. That would keep prices elevated for months, potentially into Q4 2025.
How the Fed and White House Are Reacting
The Biden administration (in conjunction with energy advisors still embedded from the Trump transition) is considering tapping the Strategic Petroleum Reserve (SPR) again. However, reserves are already lower than usual after previous drawdowns in 2022 and 2024.
Meanwhile, Federal Reserve officials have flagged the conflict as a wildcard in their inflation outlook. With energy costs feeding directly into consumer price indexes, the central bank may be forced to hold interest rates steady longer than expected, complicating plans to cut rates later this year.
Truckers and Supply Chains Already Feeling the Heat
Beyond commuters, logistics and delivery industries are on high alert. Trucking companies are seeing fuel costs rise by 8% in some regions, with long-haul freight companies bracing for squeezed margins and potential surcharges.
This can create a ripple effect across consumer goods prices, especially for food, home supplies, and electronics. Major retailers may begin raising prices to compensate for fuel surcharges, triggering a new round of inflation.
Consumers Are Adjusting
According to a survey by GasBuddy, 61% of drivers said they plan to cut back on non-essential trips if prices climb above $3.75 per gallon nationally. Meanwhile, EV charging station traffic has surged in states like Colorado and Arizona, signaling a renewed interest in alternative transport.
Apps like Upside and GetUpside have seen a spike in downloads this month as consumers hunt for the cheapest gas. Loyalty programs at Shell, BP, and Costco are also reporting higher usage rates.
Could It Get Worse Before It Gets Better?
That depends entirely on what happens next in the Middle East. If Iran retaliates against Saudi Arabia or U.S. military bases, markets could panic. Conversely, a diplomatic de-escalation could trigger a swift correction.
The Energy Information Administration (EIA) projects that if the crisis is contained, average U.S. gas prices could return to $3.20-$3.30 by late August. But if the Strait of Hormuz is blocked for any significant time, prices north of $4.00 nationally would not be off the table.
What Drivers Can Do Now
- Use gas price tracking apps to find the cheapest stations nearby
- Take advantage of fuel loyalty programs and credit card rewards
- Consider carpooling or public transit where available
- Avoid topping off your tank unnecessarily when prices are surging
Bottom Line
Geopolitical risk is once again hitting U.S. wallets in a very visible way. The Israel-Iran conflict has reminded markets just how fragile the global oil supply chain is, and American consumers are paying the price.
With hurricane season looming and political uncertainty intensifying, gas price volatility may just be getting started.
Leo Cruz brings sharp insights into the world of politics, offering balanced reporting and analysis on the latest policies, elections, and global political events. With years of experience covering campaigns and interviewing world leaders, Leo ensures readers are always informed and engaged.
