Oil Prices Soar Amid Escalating Iran War
The ongoing Iran war has led to rising oil and gasoline costs, despite early ceasefire news that temporarily moderated prices. The cost of a U.S. barrel of oil topped $100 on Thursday amid fresh attacks, including U.S. strikes on Iranian oil tankers in retribution for commercial shipping attacks. Diesel is approaching a record-high $6 per gallon, with the average price of regular gasoline standing at $4.28 as of Thursday, up from $4.01 one month ago.
The Energy Department analysis predicts that the average price of a gallon of gas will stay at about $4 for the rest of the year. The administration has rolled out several steps to contain prices but they have had little impact so far or may take months or years to materialize. One way to reduce prices is to get more oil passing through the Strait of Hormuz, but this would require a meaningful peace deal that has yet to materialize.
The war is widening on another front as pressure on the Strait of Hormuz has been relieved somewhat since Saudi Arabia expedited and expanded the use of a pipeline to the Red Sea. However, this route is coming under increased attacks by the Houthis, an Iranian proxy group, which have hit multiple tankers in the last month.
Major banks are preparing for permanent disruption to the Strait of Hormuz and raising estimates for a barrel of oil next year. In recent days, HSBC, Goldman Sachs, and Bank of America all raised their 2027 estimated cost for a barrel of oil to about $85, with HSBC analysts revising their estimate by $20 per barrel.