The U.S. economy may be on the verge of renewed inflationary pressure following its recent military action targeting Iranian nuclear facilities. With the threat of geopolitical instability looming over the global energy market, the cost of oil and gas is now climbing sharply—an unwelcome development for inflation-weary American consumers.
Oil Prices Poised for Sharp Increase
Experts anticipate a jump in crude oil prices by around $5 per barrel as markets reopen, with forecasts suggesting U.S. oil could reach $80 a barrel—a level not seen since early 2025. Andy Lipow of Lipow Oil Associates noted that this spike follows months of relative price stability, where oil hovered between $60 and $75.
This recent affordability in oil contributed to lower gas prices across the United States, easing pressure on consumers. Many regions enjoyed pump prices below $3 per gallon. However, the escalation between the U.S. and Iran threatens to reverse that trend quickly.
Duration and Impact Remain Uncertain
Economists caution against assuming that oil prices will remain elevated long-term. Joe Brusuelas, chief economist at RSM, pointed out that oil prices can fluctuate rapidly in response to global events. The recent volatility began with Israel’s unexpected military action on June 13, which pushed prices up by about 10%. Yet, those gains briefly receded after President Trump paused further military action to give diplomacy a chance.
The situation remains fluid and heavily depends on Iran’s response. Of particular concern is the potential closure of the Strait of Hormuz—a narrow but crucial maritime route that transports approximately 20% of the world’s oil supply.
Iran’s Response Could Shape Global Oil Flows
Iranian Foreign Minister Abbas Araghchi hinted that Tehran is evaluating several options in response to the strikes. A top adviser to Iran’s Supreme Leader has already called for shutting the Strait of Hormuz, a move that would trigger severe consequences for the global economy.
Energy analyst Bob McNally, who served under President George W. Bush, warned that such a drastic action by Iran might invite a broader military response. “If Iran were to block the strait or target oil infrastructure in the Persian Gulf, the world could face a significant energy crisis,” McNally said.
He added that Iran might use the threat of skyrocketing oil prices as a form of deterrence, hoping that the fear of energy instability will temper further U.S. action.
Global Stakes and Economic Fallout
Secretary of State Marco Rubio urged China to intervene diplomatically, noting that China imports a third of the oil passing through the Persian Gulf. In contrast, U.S. reliance on the region’s oil has significantly declined, now accounting for under 3% of American crude imports.
“Beijing has more at stake in keeping the strait open,” Rubio said during a Sunday news appearance.
For American consumers, higher fuel prices could arrive sooner than expected. Patrick De Haan of GasBuddy noted that if oil markets continue surging, price hikes at the pump could be visible within days. A significant disruption in oil shipments could push prices at the pump up by as much as 75 cents per gallon, according to Lipow.
Inflation on the Horizon?
Beyond immediate energy costs, economists warn that inflation could accelerate in the coming months. Brusuelas suggested that the current economic calm may precede a summer surge, driven by both geopolitical tensions and U.S. trade tariffs.
With inflation already a concern in policy circles, this latest geopolitical shock may add another layer of complexity to the economic outlook for 2025.
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