Oil Prices, Iran, and Your gas tank - What's Actually Going On?

If you’ve noticed gas prices climbing again, you’re not alone. Over the past couple of weeks, prices at the pump have moved up quickly—and at just about the same time as we're seeing news coverage of what they're calling a new "War with Iran". Surely the two are connected?

Depending on where you look, you’ll hear very different explanations about whether they are or to what extent. Some just say it's purely a political issue - if you blame the President for whether you think gas is too high, you'll blame him for everything anyway. Others dismiss the connection entirely, arguing that because the U.S. produces so much of its own oil, what’s happening overseas shouldn’t matter. They even go as far as saying people tying rising prices to what's happening with Iran are just peddling fake news.

The reality is more complex—and more interesting—than either of those explanations suggests. To understand why gas prices are rising, you have to look at how global oil markets actually work.

Where Prices Stand Right Now

Let’s start with the facts that we can measure.

Crude oil prices have indeed risen sharply in an unusually short period of time. Global benchmark prices like Brent crude are now hovering around the $100-per-barrel range, with U.S. benchmark crude (WTI) not far behind in the mid-to-high $90s. Just a few weeks ago, those same prices were closer to the mid-$60s to low-$70s range.

That’s a significant jump—and it hasn’t gone unnoticed at the pump.

The national average price for regular gasoline is now roughly in the $3.70 to $3.80 per gallon range. Not long ago, prices were closer to $3.00. In other words, drivers are seeing increases of 60 to 80 cents per gallon in a relatively short window.

These changes aren’t random. They’re tied directly to what’s happening in the global oil market. Let's unpack why we can say that.

Why the Strait of Hormuz Matters

One of the key reasons oil markets are reacting right now is the Strait of Hormuz.

It’s a narrow shipping passage near Iran that connects the Persian Gulf to the rest of the world—and it’s one of the most important energy chokepoints on the planet. Roughly 20% of the world’s oil supply moves through this single corridor.

That doesn’t mean all of that oil is destined for the United States. But it does mean that any disruption—or even the threat of disruption—can have a ripple effect across the entire global market.

Here’s how that works in practice:

When tensions rise, and there’s a risk that shipping could be slowed, restricted, or blocked, traders don’t wait to see what happens. They respond immediately. The expectation, alone, of a tighter supply is enough to push oil prices higher.

That increase then flows downstream. Refineries have to pay more for the crude oil they'll use to make gas and diesel. Distributors then have to pay more for that refined fuel. And eventually, consumers see higher prices at the pump.

"We've got plenty of oil" - Why our own oil Production Doesn’t Insulate Us

A common argument you’ll hear is that the United States produces a large amount of its own oil, so global disruptions shouldn’t affect domestic prices.

There’s some truth in that—but it’s too incomplete to accept at face value.

Crude oil is a globally traded commodity. Prices aren’t set in isolation based simply on where the oil comes from; they’re influenced by global supply and demand. Even oil produced in the United States is priced relative to global benchmarks.

That means when global prices rise, our domestic prices tend to rise with them.

Also, U.S. oil producers often sell their oil into international markets. Not all U.S. oil stays in this country. Our own refineries here at home compete for crude oil from around the world. And fuel products like gasoline and diesel are part of that same interconnected system.

So while having a robust domestic oil production is way better than not having it, it doesn’t create a bubble that shields the U.S. from global price movements. Which means what's happening in Iran DOES matter, no matter how much oil we pump out locally.

The Part Most People Don’t Know: Not All Oil Is the Same

Here’s where things get more interesting—and where most simple explanations stop short.

Not all crude oil is the same. You’ll often hear terms like “light sweet crude” and “heavy crude.” Those aren’t just technical labels—they have real implications for how fuel is produced.

Light sweet crude is easier to refine. It contains less sulfur and naturally yields higher amounts of gasoline, diesel, and jet fuel with less processing.

Heavy crude, by contrast, is thicker and contains more impurities. It requires more complex and costly refining to turn it into usable fuels.

Where oil comes from often determines which type it is.

Much of the oil moving through the Strait of Hormuz is relatively light and easier to refine, which helps explain why Middle Eastern supply plays such an important role in global markets.

At the same time, many of the barrels processed in U.S. refineries come from heavier, more complex sources—particularly from Canada, Mexico, and historically Venezuela. These heavier crudes are more difficult to process, but many U.S. refineries were specifically designed to handle them.

Adding another layer, much of the oil produced domestically in places like the Permian Basin is actually light, sweet crude. That means the U.S. isn’t just dealing with how much oil is available—it’s constantly balancing different types of crude to keep refineries running efficiently.

And that leads to the key point.

Refineries don’t typically rely on just one type of crude. They use blends of different oils to maximize efficiency and output.

When certain types of crude—like light sweet oil from the Middle East—become harder to access or more expensive, that balance gets disrupted. Refineries end up paying more for the crude they need, adjusting their mix, and often operating less efficiently.

All of that increases the cost of producing gasoline and diesel. So even if the total oil supply hasn’t disappeared, changes in the type of available crude can still drive prices higher.

In other words, it’s not just how much oil is available—it’s what kind.

Markets Are Pricing the Future, Not Just the Present

Another important piece of the puzzle is that oil markets don’t just react to current conditions—they react to expectations. The oil prices today reflect what traders believe could happen tomorrow.

If there’s uncertainty about how a conflict might unfold—whether it could escalate, how long it might last, or whether key shipping routes could be disrupted—that uncertainty gets built into prices.

This is often referred to as a “risk premium.”

Even if oil is still flowing today, the possibility that it might not flow as freely in the near future is enough to push prices upward. And that’s part of what we’re seeing now. The market isn’t just reacting to events—it’s reacting to the unknown.

There's also something else that's part of the reality. We just finished acknowledging that oil prices are based partly on what oil traders think will happen in the future. No matter what we think about President Trump, the perception of him does matter to this because, again, whether we like it or not, President Trump is viewed by most of the world as "unpredictable". If oil traders really don't have confidence that things are going to stabilize, or if they have a real fear that President Trump's actions may widen the conflict, that's not going to help bring oil prices down. That's not fake news, that's the economic reality of the marketplace.

What About the Strategic Petroleum Reserve?

You may also be hearing about the U.S. Strategic Petroleum Reserve (SPR), especially since the White House has recently ordered a release of oil from that reserve in response to rising prices and global supply concerns.

This isn’t the first time that’s happened. Presidents from both parties have authorized SPR releases during periods of disruption or price spikes—including during the Gulf War in the early 1990s (Bush I), after Hurricane Katrina in 2005 (Bush II), during supply disruptions tied to unrest in Libya in 2011 (Obama), and more recently during the energy price surge in 2022 (Biden).

The SPR is essentially a large emergency stockpile of crude oil maintained by the federal government and stashed away in gigantic underground salt caverns. In times of disruption, some of this oil can be released into the market to help increase supply and stabilize prices.

And it can help—especially in the short term.

But it’s not a perfect solution.

First, it’s a finite release. It doesn't change the underlying reasons prices might be rising at the time. It can’t replace sustained global supply disruptions over time.

Second, the type of oil in the reserve doesn’t always match what refineries need most. As we’ve seen, the type of crude matters, not just the volume of it.

So while SPR releases can ease pressure, they don’t eliminate the underlying dynamics driving prices higher. It's only going to be a small shift.

How much is it going to help?

History gives us a useful benchmark. During the large-scale release in 2022, government analysis estimated that the additional supply lowered gasoline prices by somewhere in the range of about 15 to 40 cents per gallon. Earlier releases during events like the Gulf War, Hurricane Katrina, and the Libyan conflict also helped stabilize markets and temporarily reduce oil prices, but the effects were generally short-lived.

That points to an important takeaway: SPR releases can ease pressure and prevent prices from rising even faster—but they’re not large enough to fully offset major global supply disruptions.

What to Expect This Summer

Even without global tensions, gas prices tend to rise in the summer.

There are two main reasons:

• Increased travel demand during peak driving season
• The use of summer gasoline blends, which are more expensive to produce

This year, however, prices are already elevated heading into that seasonal increase. That means the usual summer rise could be layered on top of everything we've seen. Analysts are already warning that if things stay volatile as they have been. And if current conditions persist, national average gas prices could move closer to—or even exceed—the $4 per gallon range in some areas.

Putting It All Together

Here's what we can take away. Gas prices don’t move for a single reason. What we’re seeing right now is the result of several factors working at the same time:

• Global supply risks tied to geopolitical tensions
• The interconnected nature of oil markets
• The importance of crude oil types and refinery dynamics
• Seasonal demand increases on the horizon

In the internet age, we've been conditioned to want easy, black-and-white answers to things. It’s easy to reduce rising gas prices to a single cause, especially in a political environment where simple explanations are appealing (even more appealing if they allow us to blame the side we don't like).

But the reality is more nuanced. There’s no single lever that explains what you’re paying at the pump—but there are clear reasons why it’s happening. And understanding those reasons makes it a lot easier to see where things might be headed next.