Fuel prices surged after the Trump administration launched strikes against Iran on Saturday, immediately raising questions about whether the war would increase energy costs for Americans, put more pressure on power grids, and push companies to pump out more oil and gas in the US. If conflict drags on, that could potentially play into Donald Trump’s plans to “drill, baby, drill” — but that doesn’t necessarily protect Americans from higher energy prices.
Keep in mind that it’s still too early to tell what kind of war the US may have sparked. The spike in global oil prices could be short-lived. But prolonged conflict and disruptions to oil and gas production in the Middle East could reshape the global flow of fossil fuels.
A longer military engagement has the potential to change forecasts for fossil fuel production in the US — already the world’s biggest oil and gas producer. It also risks inflaming a growing sore point for the Trump administration: rising costs for Americans as the nation’s energy demands grow.
“It’s an interesting balance to walk”
“It’s an interesting balance to walk because a higher oil price environment, which incentivizes increased oil production, fits within the ‘drill, baby, drill’ mantra, but it is also reflective of an environment where energy and particularly gasoline prices are likely more expensive,” says Reed Blakemore, director of research and programs at the Atlantic Council’s Global Energy Center.
“The balance of how the consequences of this war with Iran manifest in US energy affordability and US oil and gas production is a really important space to watch particularly as we [move] toward midterm elections in November,” Blakemore says. Soaring electricity costs, particularly amid the rush to build new, energy-hungry data centers, have already become a hot topic in local races across the US.
The international crude oil price was up 8 percent to about $84 a barrel by Tuesday, the highest it’s been since July 2024. It’s pushed up the price of gasoline 10 cents to an average of $3.11 a gallon in the US. The cost of liquefied natural gas (LNG), a more important fuel source for electricity and heating, climbed 45 percent in Asia and 30 percent in Europe.
Since the conflict broke out, all eyes have been on the Strait of Hormuz that borders Iran, the United Arab Emirates, and Oman, through which one-fifth of global petroleum consumption and LNG trade typically moves. That transport ground to a halt this week as the Iranian Revolutionary Guard reportedly threatened to fire on ships and shipping insurers changed or canceled policies. The Trump administration now says it’ll provide naval escorts and risk insurance for ships moving through the strait.
“How much of that oil can continue to flow out? That’s the question everyone’s asking now,” says Mohith Velamala, downstream oil and chemicals specialist at BloombergNEF.
Because the US already produces so much oil and gas, it’s more insulated than other countries that are more dependent on fossil fuels from Iran and its neighbors, including Qatar, where energy infrastructure has been targeted in attacks by Iran. If anything, higher prices could eventually encourage more oil and gas production in the US. That’s been a key priority for the Trump administration as part of the president’s obsession with “American energy dominance.”
It’s still a waiting game
Despite President Trump’s efforts to boost the fossil fuel industry since stepping back into office, forecasts for actual production have changed little. Prior to US strikes against Iran over the weekend, BNEF only forecast a 2.5 percent increase in US oil production between 2026 and 2030. That’s due in large part to a glut in global oil supply lowering prices. With war escalating in the Middle East, we could start to see that trend reverse.
It’s still a waiting game, however. The existing oversupply of oil has likely blunted the impact of the conflict on markets, and price spikes could be temporary if fighting winds down and the Strait of Hormuz opens up to shipping again. US fossil fuel companies will want to make decisions to ramp up production based on more long-term structural changes rather than one-off geopolitical events. As significant as this week’s events have been, companies would need to ensure it’s worth the capital needed to open up new wells. The Trump administration reportedly doesn’t see a need to even draw on the nation’s strategic petroleum reserve so far.
The calculus will probably shift if the conflict lasts more than four to five weeks, which Trump said was a possibility on Monday. At that point there could be more serious conversation about ramping up production as the market moves toward a more supply-constrained environment, experts say. Increasing production also “gives the United States more flexibility for these types of situations where it sees a national security risk that might have ancillary energy security challenges,” Blakemore says. In other words, it’s a measure that can shield Americans from some of the price pains of war.
In a worst case-scenario, however, natural gas prices could still tick up — affecting Americans’ utility bills. The US is a leading exporter of LNG, and Trump has sought to further increase exports of the fuel. If the US starts filling in for a dwindling flow coming from Qatar — also a major LNG exporter — that could theoretically start to cut into supplies available for Americans. Electricity costs could spike, which are already rising across the US as power demand grows for the first time in more than a decade.
To be sure, this would be possible in “a very extreme scenario” with a prolonged disruption in the Strait of Hormuz that would essentially take Qatari LNG off the market, Blakemore says. “That, I don’t think appears to be on the cards right now.” But we might not see a clearer picture of how this conflict is likely to unfold and what that means for energy until next week, he adds.
We have seen something similar happen after Russia’s invasion of Ukraine, which raised electricity and gasoline prices in the US and across Europe. That has been a protracted conflict that triggered new sanctions and an uptick in US LNG exports to the EU and UK — the kinds of structural changes to the market that we have yet to see so soon after fighting escalated with Iran.
There’s also the argument to be made that reducing dependency on fossil fuels would limit the volatility in energy prices. “The current crisis is just another example of the instability and risk associated with fossil fuel dependence,” Lorne Stockman, research co-director at the environmental group Oil Change International, said in an email. “There is already an energy affordability crisis in the U.S. triggered by rising gas prices and rising electricity demand. This can only get worse if the situation in the Gulf continues.”
If the conflict persists, it could bolster the idea that a diverse energy mix inclusive of renewables and nuclear energy would strengthen energy security, Blakemore says. Trump, however, has worked to roll back tax credits and federal funding for wind and solar projects as part of his focus on boosting fossil fuels. Federal subsidies for fossil fuels have reached nearly $35 billion annually, according to a report Oil Change International published last year.
