Rising oil prices push US gasoline above $3/gal as Middle East conflict disrupts supply chains
Crude oil prices surged to multi-month highs following escalating conflict in the Middle East, lifting US retail gasoline prices above $3/gal and raising concerns about prolonged disruptions to global oil supply chains.
Brent crude briefly climbed above $85/bbl on Mar. 3—its highest level since July 2024—while US West Texas Intermediate (WTI) rose past $77/bbl, a 6-month high, as markets priced in the risk of supply disruptions linked to the regional conflict. However, prices partially normalized on the afternoon of Mar. 3 following a US government announcement of plans to offset the price increases.
The rally in crude has pushed average US retail gasoline prices above $3/gal, according to Morningstar DBRS. Analysts say consumers will bear most of the impact if prices remain elevated, while fuel retailers are expected to pass higher wholesale costs through to pump prices.
Although higher prices could reduce discretionary travel, overall fuel demand is likely to remain relatively resilient given the largely nondiscretionary nature of daily driving. In the near term, some motorists have accelerated fuel purchases in anticipation of further price increases, temporarily boosting retail sales.
Supply chains
Even if tanker traffic through the Strait of Hormuz partially resumes, the oil market may continue to face significant logistical disruptions.
“The idea that things return to normal once ships start moving again is misleading,” said Neil Crosby, AVP of oil analytics at Sparta. “Even if the Strait operates at around 80% of normal capacity, that still represents a huge logistical shock for the global oil system.”
The waterway handles roughly one-fifth of global seaborne crude trade, meaning even partial disruptions can create bottlenecks across freight markets, refinery supply chains, and regional crude balances.
Insurance constraints, naval escorts, and vessel rerouting are already slowing cargo movements and tightening available supply, analysts say.
Shipping, refining markets tighten
The crisis has also reshaped tanker markets as refiners seek alternative crude supplies.
“In the early stages of the crisis the tanker market essentially froze,” said Michael Ryan, freight commodity owner at Sparta, citing uncertainty around insurance coverage, security conditions, and loading schedules.
Refiners that normally source crude from the Middle East are increasingly turning to the US Gulf Coast, West Africa, and the North Sea—shifts that significantly increase voyage distances and tighten vessel availability.
At the same time, supply constraints may begin to ripple into refined product markets.
“If crude flows remain constrained, even partially, the system will struggle to keep refineries running at normal rates, particularly in Asia,” said Philip Jones-Lux, senior analyst at Sparta.
Jet fuel and middle distillates may be the first products to tighten, potentially pushing refining margins higher as markets adjust to constrained supply.
Despite the volatility, large North American fuel retailers are expected to remain resilient, as higher pump prices allow them to offset rising wholesale fuel costs.