President Donald Trump warned the United States could face ‘economic catastrophe’ if the conflict with Iran continued, saying gas prices would spike as emergency oil reserves were drawn down. While a recent U.S.-Iran memorandum of understanding and signs that the Strait of Hormuz are reopening have eased some immediate fears, analysts say the financial damage is already significant and will linger.
The Institute on Taxation and Economic Policy (ITEP) estimates that Americans have paid almost $54 billion more at the pump because of the war — roughly an extra $400 per household compared with a scenario in which the conflict never happened. Although average retail gasoline prices have fallen below $4 per gallon for the first time since the early days of the fighting in March, prices remain about 25% higher than a year ago.
Restoring normal flows will not be instantaneous. The Associated Press reports it could take weeks or months for oil to resume steady passage through the Strait of Hormuz. Gulf producers that cut output will need time to ramp back up, ship captains may be cautious about transiting the area, and refineries that purchased crude oil weeks or months in advance will continue processing higher-cost inputs until new, cheaper supplies arrive. The disruption extended beyond crude and refined fuels, affecting supply chains for fertilizer, food and even consumer goods like footwear, meaning higher costs may persist across multiple sectors.
Petroleum analyst Patrick De Haan of GasBuddy told reporters the return to pre-war price levels will be ‘a very long, multi-month to multi-year process’ and suggested it could take until mid-to-late 2027 for full normalization.
One clear beneficiary of the price surge has been the fossil fuel industry. An analysis from 350.org finds that households and businesses have effectively paid the oil and gas sector an additional $374 billion in windfall profits over the course of the conflict. Using International Monetary Fund pricing scenarios, 350.org projects that the amount extracted from consumers could swell to more than $700 billion by year-end, even if the Strait of Hormuz remains open.
Andreas Sieber, head of political strategy at 350.org, warned that even with a reopening of shipping lanes, prices are likely to stay above pre-crisis levels, resulting in a substantial transfer of wealth toward fossil fuel companies built on market instability and hardship for consumers.
This report summarizes recent analyses and reporting by ITEP, the Associated Press, GasBuddy, 350.org and related coverage in Common Dreams.
