After a brief respite, gasoline prices have resumed their steady climb, rising 31 cents in the past week to an average of $4.48 per gallon on Tuesday, according to AAA. This increase hits drivers hard, as prices have surged 50% since the conflict with Iran began.
Why Are Gas Prices Rising?
The primary driver is the global energy crisis triggered by the Iran war. Crude oil, the main component of gasoline, has seen prices climb for most of the past two months due to the effective closure of the Strait of Hormuz. This narrow passage in the Persian Gulf, through which a fifth of the world's crude oil normally flows, has been severely constrained, leaving oil tankers stranded and unable to deliver crude.
In mid-April, there was a glimmer of hope as signs of a potential ceasefire emerged, leading to daily declines in gasoline prices for nearly two weeks. Rob Smith, director of global fuel retail at S&P Global Energy, explained: 'After the announcement of the initial ceasefire, there was optimism that this could be the beginning of the end of the conflict. Crude prices came down, gasoline spot prices followed, and retailers lowered prices.' However, as the war persisted, prices reversed course and began climbing again.
'There is a fundamental shortfall that will exist globally, a fundamental struggle to meet demand that will drive up prices,' Smith added. 'No matter what a government says or what any market person thinks, there is true upward pressure 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 numerous factors influence their decisions. The price of a barrel of crude oil is the main ingredient in gasoline costs. In the U.S., oil prices accounted for about 51% of the price of a gallon of gasoline in 2025, according to the Energy Information Administration (EIA). When crude oil prices rise, gasoline prices generally follow. Less oil on the market means higher prices for both oil and gasoline.
The effective closure of the Strait of Hormuz 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. Bob Kleinberg, adjunct senior research scholar at the Columbia University Center on Global Energy Policy, compared the average U.S. gasoline price with the price of a barrel of WTI (the U.S. benchmark oil) over recent weeks and found their price changes generally matched. 'Not much of a mystery here,' Kleinberg said. 'It's not exactly proportional, but the shape of the curves follows the same pattern with very little delay.'
Federal and state taxes contributed about 17% of the gasoline 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 gasoline prices well above the national average.
What Caused the 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, helping moderate prices,' said Jim Krane, energy research fellow at Rice University’s Baker Institute. 'The Trump administration decided to punish Iran by blocking their exports, which put pressure on Iran but also forced global oil prices 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 stalled diplomacy talks. '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, gasoline prices jumped 48 cents in a week. The highest weekly jump on record was in March 2022, when prices rose 60 cents in a week after Russia invaded Ukraine, according to AAA.
No Quick Fix
No one can predict how high gasoline prices will climb. A gallon of regular in the U.S. now costs more than it did in early May 2022, and back then, prices kept climbing through Memorial Day, AAA said. The longer the flow of oil is constrained through the Strait of Hormuz, the higher prices will go, and the longer it will take to return to normal, Smith said.
'Even if there was a true and lasting resolution of the conflict, with both sides committing to keep Hormuz open, it would still take months to get back to pre-war levels, if not longer,' Smith said. 'There will still be a risk premium associated with going through that region. It was never perfectly safe, but the past few months have shown that it will be hard to convince shippers and insurance companies that the risk level is similar to what it was in February. It will be a long time before anyone can be convinced of that.'
