Why gasoline costs 52% more in the US than it did before the Iran war

NEW YORK (AP) — The price of a gallon of regular gasoline in the U.S. climbed 31 cents in the past week, spiking to an average of $4.54 per gallon Wednesday, a price 52% higher than before the war with Iran began, according to AAA data.

The main reason drivers are paying more at the pump is because the war has stranded oil tankers near the Strait of Hormuz, a narrow passage through which a fifth of the world’s crude oil normally passes. The price of crude oil, which is the main ingredient in gasoline, climbed for most of the past two months because Iran has effectively shut the waterway located off its coast.

In mid-April, U.S. gasoline prices fell daily for almost two weeks amid signs the conflict could be winding down.

“After the announcement of the initial ceasefire, there was kind of optimism that this really could be the beginning of the end of the conflict,” said Rob Smith, director of global fuel retail at S&P Global Energy. “And so crude prices came down correspondingly, gasoline spot prices followed, and so on and … the retailers lowered prices as well.”

But gasoline prices reversed course and began increasing again as deepening hostilities over the strait between the U.S. and Iran kept oil supplies constrained.

“There’s a fundamental shortfall that will exist globally or fundamental struggle to meet that demand that will drive up price,” Smith said. “No matter what a government says or what any market person thinks, there is a true kind of upward pressure that’s being exerted on prices every day the Strait of Hormuz is constrained. And it is still severely constrained.”

Who sets gasoline prices

Gas station owners set prices at the pump, but a lot of factors go into what they decide to charge.

The main ingredient in gasoline cost is the price of a barrel of crude oil. In the U.S., oil prices represented about 51% of the price of a gallon of gasoline in 2025, according to the Energy Information Administration.

That means when crude oil prices rise, gasoline prices generally follow. Less oil on the market means higher prices for oil and gasoline.

Iran’s effective closure of the Strait of Hormuz during the war triggered the largest supply disruption in the history of oil markets, according to the International Energy Agency, pushing oil prices as high as $112 a barrel in early April.

Oil prices fell below $100 a barrel Wednesday after the U.S. and Iran appeared to be moving closer to an initial agreement to end the war. That could pull gasoline prices down as well, if the trend continues.

Bob Kleinberg, adjunct senior research scholar at the Columbia University Center on Global Energy Policy, compared the average price of a gallon of gasoline in the U.S. with the price for a barrel of WTI, the U.S. benchmark oil, over the past few weeks, and said their price changes generally matched up.

“Not much of a mystery here,” Kleinberg said. “It’s not exactly proportional but the shape of the curves follows the same pattern, and really with very little delay.”

Federal and state taxes contributed about 17% of the oil price, refining costs and profits contributed 14% and distribution and marketing contributed 17%, the EIA said. In some states, such as California, higher taxes and refining costs push the price of gasoline well above the national average.

What caused renewed march in gasoline prices

One event that could have changed the trajectory of gasoline prices occurred in April, when the U.S. blocked Iranian ports to stop the country from exporting oil.

“Iran had been moving an unusually high amount of oil to global markets, so that was helping moderate prices,” said Jim Krane, energy research fellow at Rice University’s Baker Institute. “The Trump administration decides they’re going to punish Iran, and try to put more pressure on Iran by blocking their exports, so of course that does put pressure on Iran, but also puts pressure on global oil prices and forces them up. That was probably a big factor.”

What refineries and traders are willing to pay for oil swings wildly after news breaks about attacks on ships in the Persian Gulf or diplomacy talks stalling. “The oil market is exquisitely sensitive to what’s coming out of the White House,” Kleinberg said.

Back in early March, at the beginning of the Iran war, the price of gasoline jumped 48 cents in a week. The highest weekly jump was in March 2022, when the price jumped 60 cents in a week after Russia invaded Ukraine, AAA said.

No quick fix

No one can predict how high gasoline prices will climb. A gallon of regular in the U.S. costs more now than it did in early May of 2022, and back then, the price kept climbing through Memorial Day, AAA said.

The longer the flow of oil through the Strait of Hormuz is hindered, the higher prices will go and the longer it will take to get back to normal, Smith said.

“Even if there was a true and lasting resolution of the conflict, both sides agree to play nice and truly do commit to keeping Hormuz open, it will still take months to get back to what it was pre-war, if not even longer,” Smith said. “There will still be within the industry a risk premium associated with going through that region. Not that it was ever a perfectly safe journey, but the past few months have shown that it’ll be hard to convince shippers and insurance companies that the risk level will be similar to what it was in February. It’ll be a long time before anyone can be convinced of that.”