Gas Hits $4 a Gallon: Iran War Pushes U.S. Fuel Prices to Highest Since 2022

The $4 Milestone

U.S. gasoline prices have hit the $4-per-gallon mark for the first time in more than three years. The national average reached $4.018, according to data from AAA reported by CNBC, matching levels not seen since August 2022 when Russia's invasion of Ukraine shook energy markets. Price tracking service GasBuddy confirmed the milestone was crossed on Monday, March 30, as reported by Reuters.

Prices have surged approximately 36% — roughly $1.06 per gallon — since the U.S. and Israel launched strikes against Iran at the end of February, according to Reuters. The New York Times reported a 35% increase over the same period. Oil prices have risen more than 50% since the war began, with U.S. crude oil futures settling at $102.88 per barrel on Monday, according to Reuters.

Brent crude, the international benchmark, is on pace for a record monthly gain dating back to the creation of the futures contract in 1988, CNBC reported.

Diesel and the Downstream Pain

Diesel prices have been hit even harder, crossing $5 per gallon on March 17, according to CNBC — more than 40% higher than pre-conflict levels. The diesel spike carries broader economic implications because the fuel powers the trucks and freight trains that transport goods to market across the country.

Andy Lipow, president of Lipow Oil Associates, warned in a March 20 note to clients that "the consumer has already seen the sticker shock from rising gasoline prices and increased airline ticket prices from the rising cost of jet fuel." He added: "However, the full effects of the higher diesel prices has yet to be felt and that will flow through the economy over the next few months."

Patrick De Haan, head of petroleum analysis at GasBuddy, told CNBC on March 20 that consumers could see the impact by April through higher supermarket prices and online order costs, saying: "This is really quickly going to ignite additional inflation."

David Doyle, head of economics at Macquarie Group, told clients in a March 25 note that the average monthly gas price in March is expected to be 25% higher compared with February — what would be the largest monthly increase dating back to October 1990, according to CNBC.

Why Prices Are Surging

The price spike traces directly to the disruption of the Strait of Hormuz, the narrow waterway through which approximately 20% of global oil supplies passed before the war, according to CNBC. Iran's effective closure of the strait has caused tanker traffic to plummet, forcing Gulf Arab oil producers to cut production as they run out of storage capacity for crude that cannot be shipped.

The International Energy Agency has called this the biggest oil supply disruption in history, CNBC reported.

Raymond James analyst Pavel Molchanov provided context to Reuters: "A sudden outbreak of war leads to a spike in US gasoline to $4.00 per gallon. That describes the current Iran conflict — and also Russia's invasion of Ukraine in 2022. Then, as now, oil prices soared around the world, and emergency oil stockpiles were tapped." Molchanov added a note of cautious optimism: "But we envision this crisis being shorter: whereas gas stayed above $4.00 for 23 weeks in 2022, we expect prices starting to cool in the next few weeks."

What the Administration Is Doing

The Trump administration has deployed several measures to try to contain the price spike, though analysts are skeptical about their effectiveness given the scale of the disruption.

The U.S. is releasing 172 million barrels of oil from its Strategic Petroleum Reserve as part of a coordinated effort by more than 30 nations to inject 400 million barrels into the market, CNBC reported.

The EPA has temporarily waived restrictions on the sale of E15 gas — a fuel blend containing 15% ethanol that is normally restricted in about half the country during summer months due to air pollution regulations. EPA Administrator Lee Zeldin told reporters at the CERAWeek conference in Houston that the agency foresees "potential for a disruption to the American fuel supply." The waiver takes effect May 1, according to CNBC.

President Trump has also waived shipping rules under the Jones Act for 60 days, allowing foreign-flagged vessels to deliver oil and gas between domestic U.S. ports. De Haan told CNBC this would help get gasoline to the West Coast and Northeast but would have limited impact on other regions.

Energy Secretary Chris Wright told CNBC that the administration has additional plans for diesel. "We do have some ideas on diesel, that we can bring extra diesel to the marketplace," Wright said. "I think we'll see that happen before too long."

Vice President JD Vance told consumers at a March 18 event in Auburn Hills, Michigan, that they face "a rough road ahead" on gas prices but promised the spike would be temporary. "We've got a problem, we know we have a problem, and we're doing everything we can to address it," Vance said, as reported by CNBC.

The Political Dimension

Surging fuel prices have become a significant political problem for President Trump and Republicans ahead of the November midterm elections. Trump had campaigned on lowering energy prices and ramping up U.S. oil and gas production, according to Reuters.

A Reuters/Ipsos poll found that 55% of respondents said their household finances had taken at least "somewhat" of a toll from gas price increases, with 21% of those impacted saying their finances were affected "a great deal."

Jeremy Siegel, economist at WisdomTree, wrote in a note cited by Reuters: "The key issue is not simply crude oil itself. It is gasoline, the most visible price in the economy for consumers, and when that price jumps it hits psychology immediately. That matters, even if the broader economic effect is more balanced than the headlines."

How Much Worse Could It Get?

Analysts say the trajectory depends on one factor above all: the Strait of Hormuz. De Haan told CNBC that gas prices could conceivably hit record levels of $5 per gallon if the bottleneck is not cleared, calling it "kind of a race against time."

De Haan also cautioned that the president has limited tools. "The president doesn't have a whole lot of levers," he told CNBC.

Lipow noted that Congress could suspend the federal excise tax on fuel, which would save consumers approximately 18 cents per gallon on gasoline and 24 cents on diesel — a measure that would provide some relief but would not address the underlying supply crisis.

For now, oil needs to start moving through the Strait again for prices to meaningfully ease, multiple analysts told CNBC. Until that happens, American drivers are paying the price of a war that has no clear end date.