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Gas Prices Top $4 as Middle East Conflict Disrupts Oil Supply

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Gas prices across the United States have surged past a key threshold, placing renewed financial strain on consumers and adding pressure to the broader economy. On Tuesday, the national average for regular gasoline climbed above $4 per gallon for the first time since August 2022, capping weeks of steady increases tied to escalating tensions in the Middle East.

The rise has been swift. Since late February, average prices have jumped by roughly 35%, according to AAA data, following disruptions to oil supply linked to the ongoing conflict involving U.S. and Israeli forces and Iran. Although the United States does not rely heavily on Middle Eastern oil, the global nature of energy markets has pushed domestic prices higher.

Industry analysts say the psychological impact of the $4 mark could alter consumer behavior. “We have this obsession with gas prices because they dictate a lot of ‘Can we drive? Can we do things we enjoy?’ And now some of that is at risk,” said Patrick De Haan, an analyst at GasBuddy.

“As we get to a month of increases and prices are much higher, the amount of pressure on Americans’ budgets and their spending is going to ramp up.”

The effects are uneven nationwide. In California, drivers are paying an average of $5.89 per gallon, while Oklahoma residents pay far less at about $3.27 per gallon. Differences in taxes, refining expenses, and distribution systems continue to shape regional price disparities.

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At the same time, diesel prices have also spiked, reaching $5.42 per gallon—up sharply from $3.76 before the conflict. Because diesel fuels are used for shipping and freight, the increase is expected to ripple through the economy, raising costs for goods ranging from groceries to furniture.

“It’s going to mean more expensive bills for truckers, tractors and trains that move the U.S. economy with diesel fuel. It’s going to mean consumers are likely greeted by rising grocery prices — and broadly speaking, a rise in U.S. inflation.”

Economists are increasingly concerned that sustained increases in fuel prices could accelerate inflation while slowing economic growth. Polling reflects that anxiety; more than half of Americans surveyed by Reuters/Ipsos reported that higher gas prices have already affected their household finances, with one in five saying the impact has been severe.

For President Trump, the situation presents both economic and political challenges. After previously highlighting falling fuel costs earlier in his term, the current surge serves as a visible reminder of the war’s consequences. “It is the biggest headache for whoever happens to be in power when something like this happens,” said Kate Gordon, a former senior adviser at the Department of Energy and now chief executive of California Forward.

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While she noted that presidents typically have limited influence over gas prices, Gordon emphasized that this situation is unusual.

“Usually, a hurricane hits the gulf and gas prices go up, and then whoever’s in power gets blamed for it,” she said. In this case, she added, Trump is “going to get blamed anyway because he’s in power, but also he made the decision to go to war in Iran.”

The administration has attempted to respond with several measures to stabilize prices. These include plans to release 172 million barrels from the Strategic Petroleum Reserve, to ease restrictions on maritime shipping, and to temporarily suspend certain sanctions on oil shipments already in transit. Officials have also relaxed some summertime fuel-blend requirements to reduce pump prices.

Even so, structural factors are pushing prices upward. Seasonal demand is increasing as Americans prepare for spring and summer travel, while the switch to more expensive summer-blend gasoline further adds to costs. Meanwhile, domestic crude futures—though down from their peak during the crisis—remain more than 50% higher than they were at the end of February.

Abroad, countries more dependent on Middle Eastern oil supplies are already taking steps to curb consumption, including encouraging drivers to limit travel.

Experts say meaningful relief is unlikely until global supply routes stabilize. In particular, attention remains focused on the Strait of Hormuz, a critical shipping corridor for oil exports. “Opening the strait is the answer until it’s not,” Gordon said. “It’s the answer until someone attacks it again.”

For now, consumers are left adjusting to higher costs that are difficult to avoid. “There are some things you can change on the margins, but it’s not easy to change where you live, where you work, where you go to school,” Gordon said. “You can be more efficient, but it’s kind of a baked-in cost.”

Celebration and Anger as Mojtaba Khamenei Takes Iran’s Highest Office

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Iran has appointed Mojtaba Khamenei as its new supreme leader following the death of his father, Ayatollah Ali Khamenei, who was killed on the first day of the war between Iran and the United States. The selection places power in the hands of a figure widely regarded as a hardliner with close ties to the Islamic Revolutionary Guard Corps (IRGC).

The decision was made by Iran’s Assembly of Experts, the 88-member clerical body responsible for choosing the country’s supreme leader. Mojtaba Khamenei, 56, had maintained a relatively low public profile during his father’s decades in power, though for years there had been speculation that he exercised significant influence behind the scenes.

Many analysts expect the new leader to continue his father’s policies. Some Iranians say that prospect has extinguished hopes of reform.

“Even the thinnest of chances for a change are no more within the system,” said a man in his 30s in Tehran.

He told the BBC the Assembly of Experts could hardly have chosen someone more closely aligned with the late leader.

“Everything will remain much the same; they don’t even need to change their chants to support the [new leader].”

Reactions among Iranians appear deeply divided. Iranian state television has aired images of pro-government rallies in cities including Tehran, Qom and Mashhad — Mojtaba Khamenei’s birthplace — where supporters waved national flags and celebrated the announcement.

At gatherings broadcast by the state news channel IRINN, some participants expressed enthusiasm about the transition.

“We’re very happy. Thanks to the Assembly of Experts. The hand of God is protecting us. Khamenei is still our leader,” one woman said.

Another woman declared, “It couldn’t have been better than this. Our hearts were warmed.”

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Large crowds were also seen gathering in Tehran’s Enghelab Square, holding portraits of Mojtaba Khamenei and his father, as car horns sounded in celebration.

“Now we are sure that the path will continue with his leadership,” one man told Reuters.

Another supporter described her “profound happiness,” saying the new leader resembled his father in leadership style.

“Of all the possible candidates, he was the most deserving and the one most similar [to the former leader].”

However, many residents interviewed by the BBC expressed anger or fear about the succession.

A woman in her 20s in Tehran said she believed Mojtaba Khamenei would be “even more oppressive than his dad”.

“I really hope their [senior officials’] lives end in the war; otherwise, if we’re under his rule, we will all die,” she said.

Another Tehran resident in his 30s said the killing of the former leader could fuel retaliation.

“He’s vengeful. They killed his father, and he won’t let go. If he can’t take revenge on the US, he will take it out on us ordinary people. I hope that Israel and the US will target him.”

Opposition sentiment has also appeared online. BBC Persian and BBC Verify confirmed social-media videos showing crowds chanting both “Death to Mojtaba” and “Death to the lackey,” while others shouted “Allahu Akbar” — meaning “God is greatest” — in support of the new leader.

Some Iranians said they knew little about Mojtaba Khamenei prior to the announcement.

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In Karaj, a city near Tehran, a man in his 20s said he had not heard much about him before the appointment. “Now it will become clear whether Trump has done a deal with them or not. They need to target him,” he said.

Another man said the appointment signaled continuity. “

“This means that nothing is going to change. It’s the same path, perhaps even worse. I don’t think that he will last.”

A woman in her 40s in Tehran expressed a similarly pessimistic view.

She said Mojtaba Khamenei was “worse than his dad”.

“If he’s alive, I think the US and Israel will target him. Before he was selected as leader on Sunday, everyone was chanting against Mojtaba,” she said. “No one accepts him except the supporters of this regime.”

The leadership change comes amid ongoing military pressure on Iran. US and Israeli forces have continued striking targets in the country during the conflict.

Earlier this week, US President Donald Trump said he hoped to influence the choice of Iran’s next supreme leader and described Mojtaba Khamenei as “unacceptable.” Hours before the announcement, Trump also warned that any successor chosen without his approval was “not going to last long”.

Israel issued its own warning before the appointment was confirmed, saying it would “continue to pursue every successor.”

Despite the announcement, Mojtaba Khamenei has not yet delivered a public speech or appearance since being named the supreme leader.

stocks

Global Stocks Slide as Fears Grow of Prolonged Iran Conflict

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Mounting concerns that fighting in the Middle East could drag on sent global markets sharply lower Tuesday, as investors reassessed the economic fallout of an expanding conflict.

US equities swung wildly before closing down for a second straight session. The Dow Jones Industrial Average finished 355 points lower, a drop of 0.73%, after plunging more than 1,200 points earlier in the day. The S&P 500 slipped 0.78%, and the Nasdaq Composite fell 0.82%, each trimming losses that had topped 2% at their worst.

Market volatility intensified. The VIX, widely viewed as Wall Street’s fear indicator, climbed 9% to its highest level in three months.

The selloff was not confined to the United States. European and Asian markets also declined for a second day. The pan-European Stoxx 600 lost 3.08%. Japan’s Nikkei 225 dropped 3.06%. South Korea’s Kospi sank 7.24%, its steepest one-day decline since April. South Korean markets had been closed on Monday for a public holiday.

Investor anxiety deepened as military operations entered a fourth consecutive day. Israel announced it was carrying out “simultaneous strikes in Tehran and Beirut,” aimed at Iranian military targets and the Iran-backed group Hezbollah.

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Sources told CNN that US embassies in Saudi Arabia and Kuwait were struck amid Iranian bombardment. In response to escalating security risks, non-emergency US government personnel in Jordan, Bahrain, Iraq, Qatar, Kuwait and the United Arab Emirates have been ordered to leave.

President Donald Trump signaled uncertainty about the duration of the campaign. In a letter to Sen. Chuck Grassley on Monday, he wrote, “It is not possible at this time to know the full scope and duration of military operations that may be necessary.”

“These strikes were undertaken to protect United States forces in the region, protect the United States homeland, advance vital United States national interests, including ensuring the free flow of maritime commerce through the Strait of Hormuz, and in collective self-defense of our regional allies, including Israel.”

Taking questions Tuesday at the White House, Trump defended the decision to strike Iran, describing it as “something that had to be done.” He asserted that “just about everything’s been knocked out” in reference to Iran’s military infrastructure and voiced surprise that Iran chose to retaliate against neighboring countries.

Energy markets reflected fears of supply disruptions. Iran said Monday it would target any vessel attempting to move through the Strait of Hormuz, a strategic chokepoint that carries roughly 20% of global oil consumption. With hostilities ongoing, shipping companies and insurers have grown wary of sending vessels through the narrow waterway.

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Crude prices extended their rally. US oil rose 5.9% Tuesday to $75.40 per barrel, building on a 6.3% gain the previous day. Brent crude climbed 5.8% to $82.14 per barrel, reaching its highest level since July 2024. Gasoline prices increased 11 cents to $3.11 a gallon.

“That the current war may be ‘inflationary’ is what’s panicking traders today,” Thierry Wizman, global FX and rates strategist at Macquarie Group, wrote in a note.

He added that earlier assumptions of a limited conflict are now in doubt.

“The view of a short war been upended today because of suggestions from the US administration that the war may be prosecuted for longer than a few weeks.”

Natural gas markets surged as well. European natural gas futures jumped 20% after soaring 38% Monday. In the US, natural gas futures advanced 6%, following a 3.5% rise a day earlier. Diesel prices outpaced those moves domestically, with futures climbing 12% Tuesday after nearly a 12% gain on Monday.

Currency and bond markets signaled shifting expectations around inflation and interest rates. The US dollar index gained 0.8% and is up 1.6% for the week, as traders weighed whether higher energy prices could delay Federal Reserve rate cuts. The 10-year Treasury yield rose as investors sold bonds and assessed the inflationary impact of higher oil prices.

Gold, often considered a refuge during turmoil, fell 4.25%, reversing Monday’s 1.2% climb to a one-month high, underscoring the sharp and uneven swings gripping financial markets.