The War in Iran Will Raise Fuel Prices and Costs Throughout the Economy

When the Trump administration’s reckless war on Iran began, all shipping through the Strait of Hormuz was effectively halted, removing roughly one-fifth of the world’s oil and gas supply from the market. Fuel prices throughout the world spiked and will likely remain elevated as long as conflict persists. In the United States, despite record levels of domestic fuel production, prices are more exposed than ever to global fuel interruptions after a decade of building infrastructure meant to link domestic supply to overseas markets.

Many parts of the U.S. economy are still dependent on fossil fuels, and higher prices for oil and gas increase the prices for gasoline, electricity, fertilizer, food, and more. As long as this war continues—and perhaps for some time thereafter—American households will pay higher prices at the pump, on their utility bills, and on their grocery bills.

How the Iran War is affecting energy prices

The price of crude oil and natural gas is skyrocketing in the wake of the war in Iran, and trends so far have been more drastic than in other recent geopolitical disruptions. Figure 1 shows the price of fuels in the month immediately following the Iranian drone attack on Saudi Arabia on September 14, 2019; the Suez Canal blockage on March 23, 2021; Russia’s invasion of Ukraine on February 24, 2022; Hamas’ attack on Israel on October 7, 2023; the 12-Day War on June 13, 2025; the U.S. attack on Venezuela on January 3, 2026; and Operation Epic Fury on February 28, 2026.

The duration of hostilities is likely to be a major determinant of the price impacts. During the June 2025 12-Day War in Iran, crude oil prices rose about 10 percent in the days before and during the conflict but returned to roughly their previous levels as the conflict ended.

But the severity of the current incident could elevate prices for a longer period. In the example of Russia’s invasion of Ukraine, natural gas futures prices increased by roughly 70 percent in the first 11 days of the conflict—comparable to the 77 percent increase seen in the first nine days of this conflict—but went on to remain elevated for years.

Higher prices at the pump

In just the first week after President Donald Trump bombed Iran, the average price of gasoline in the United States increased 48 cents per gallon. This is because oil prices are set on the global market, and nearly half of the cost of gasoline is the crude oil from which it is refined. President Trump has dismissed the real impacts that Americans are facing at the gas pump, saying that it is “a very small price to pay for U.S.A., and World, Safety and Peace.”

However, as they prepared for war—and despite the easily foreseeable impact of hostilities on energy prices—the Trump administration neglected to refill the nation’s Strategic Petroleum Reserve, which leaves the economy further exposed to supply shocks.

And, before the war began, the Trump administration had already locked in an increase of 37 cents per gallon over the coming decade by repealing the fines for automakers that violate fuel economy standards; by eliminating carbon pollution standards for vehicles; and by repealing the consumer rebates that helped middle-income families afford electric vehicles. By neglecting the Strategic Petroleum Reserve and making it harder for people who want to buy electric vehicles to find affordable options, this administration is keeping the American economy susceptible to fuel price shocks now and for years to come.

Higher utility bills

Natural gas power plants generate roughly 43 percent of U.S. electricity, and their fuel and operational costs set the marginal price of electricity during most hours across the country. The price of natural gas has been increasingly linked to the international markets since the U.S. began exporting liquefied natural gas (LNG) in 2016. As a result, when the cost of LNG increases in other countries, it results in higher domestic natural gas prices, raising the cost of home heating and electricity.

For example, when Russia invaded Ukraine in February 2022, U.S. LNG exporters capitalized on the global supply shock, sending more LNG supplies to Europe, and by August 2022, domestic natural gas prices had nearly doubled and average electricity prices had jumped 13 percent.

Following the start of Operation Epic Fury, both European and Asian LNG futures prices have already skyrocketed. As of March 9, they’ve increased by 77 percent and 51 percent, respectively, compared to prices before the event. This price increase is much higher than the increase immediately after Russia’s invasion of Ukraine. If this increase persists, it could raise utility bills further.

Higher grocery bills

Fuel price spikes also drive up the price of food. In addition to fueling farm equipment and the trucks that transport food to market, fossil fuels are a primary feedstock in the production of fertilizer, often accounting for as much as 80 percent of the cost of production. Altogether, fuel costs account for between 40 and 50 percent of all variable costs of growing crops in countries like the United States.

The countries impacted by ongoing hostilities—including Iran, Qatar, Saudi Arabia, Bahrain, and the United Arab Emirates—are among the world’s top producers of fertilizer, and one-third of the global supply of fertilizer travels through the Strait of Hormuz. Indeed, prices of urea nitrogen fertilizer have already increased by 25 percent in the span of a week. While most of the United States’ imported fertilizer comes from Canada, the removal of so much product from the global market is likely to raise prices at home as well as abroad, creating a risk of increased global hunger if farmers have to stretch their fertilizer supply and produce lower yields.

The supply disruption may already be changing spring planting decisions for U.S. farmers—many of whom delayed purchasing fertilizers after the Trump administration’s tariffs drove prices up—once again leaving American farmers to face price increases and precarity during a time when they are already struggling with increasing fertilizer costs and projected falling income from crop receipts. In fact, the gap between the rising prices crop farmers pay for their inputs and the falling prices they receive for their goods is the largest in the last decade, meaning that American farmers are not able to absorb additional input costs that would result from further spikes in fertilizer prices.

The war could also result in higher prices for foods that are primarily imported, including coffee and tropical or off-season produce, since global shipping is so heavily reliant on fossil fuels. Higher crude oil prices will impact food packaging costs as well, and combined with rising transportation and fertilizer costs, multiple pieces of the food supply chain are facing pressures that can push up grocery prices.

Inflation throughout the economy

The price increases associated with Trump’s war of choice are also likely to affect other portions of the economy—sometimes in unexpected ways. Take air travel, for example. Many airlines no longer hedge or lock in jet fuel prices, and instead purchase fuel at the going market rate to meet their operational needs. Since the start of the conflict, some jet fuel prices have doubled. A one-way trip to Quebec City from Newark on March 11 aboard Air Canada nearly tripled to $1,499 compared to a week ago, according to data from Google Flights. Flights from Los Angeles to Lima on LATAM Airlines rose to $2,125, compared to $499 in the same period.

Similar pressures will raise the cost of air freight, which is likely to further raise the cost of goods for consumers. The conflict has already disrupted 18 percent of air cargo, forcing major logistics shifts for carriers that are now seeking to avoid the Gulf region. And, the longer the routes necessary to avoid exposure to Trump’s war, the more fuel that is required, reducing the amount of cargo aircraft can carry so as not to exceed weight limits. Some airlines are expected to add refueling stops. The impact could raise prices (or slow the delivery) of pharmaceuticals from India or semiconductors from Southeast Asia, which are often exported through the ports in the Gulf before reaching the rest of the world.

The semiconductor industry is facing possible shortages of helium, a key ingredient for manufacturing that is a byproduct of LNG. One-third of the world’s helium comes from Qatar. South Korea’s semiconductors industry is also warning that a prolonged conflict could cause shortages in other critical components in the chipmaking process. For instance, two-thirds of the world’s bromine, a key material in the chipmaking process, comes from Israel and Jordan. And the Gulf is a transshipment hub for semiconductors, so any interruptions in Gulf trade as a result of the war will likely increase the cost and decrease the supply of chips. Given that so many industries rely on semiconductors, the knock-on effects here could be considerable.

The conflict is also likely to have a large impact on those industries that rely on aluminum imports. According to a recent CNBC report, 9 percent of global aluminum production occurs in the Gulf and a full three-quarters of that is exported to world markets. Already, aluminum prices have hit a four-year high, raising input costs for countless industries that rely on this material, including transportation, construction, and packaging. What’s more, U.S. aluminum buyers are already paying record prices as a result of the Trump administration’s massive tariffs.

Fuel supply shocks have repercussions across the entire economy, putting upward pressure on overall inflation. Morgan Stanley anticipates that a 10 percent increase in oil prices could increase headline consumer prices by about 0.35 percent over the next three months, and Royal Bank of Canada warns that a sustained oil price of $100 per barrel would keep U.S. inflation above 3 percent for the remainder of the year.

Conclusion

The longer the war in Iran continues, the more it is likely to increase the costs of gasoline, electricity, food, and inflation throughout the economy. This may profit the fossil fuel industry at everyone else’s expense: The war in Iran has already seen billions of dollars spent in military operations; taken the lives of seven U.S. military service members; and killed more than 1,000 Iranian civilians, including nearly 170 Iranian schoolchildren.

The authors would like to thank Sophie Conroy, Cathleen Kelly, Shannon Baker-Branstetter, Jenny Rowland-Shea, Courtney Federico, Allison McManus, Andrew Miller, Ryan Mulholland, Emily Gee, Jared Bernstein, Kyle Ross, Kennedy Andara, Julia Cusick, and Colin Seeberger of the Center for American Progress for their contributions to this analysis.