How long can that go on when gas prices take spendable money out of pockets?
Since war broke out in the Middle East at the end of February, the world's energy markets have been forced to reckon with a familiar and painful truth: that the flow of oil and the flow of conflict are deeply intertwined. Brent crude has climbed to $126 a barrel — nearly double its pre-war price — and American drivers are now paying $4.30 a gallon, a burden that falls unevenly but is felt by nearly everyone. With the Strait of Hormuz closed, diplomacy stalled, and no clear resolution in sight, the question is no longer whether energy costs will reshape daily life, but how long ordinary people can absorb the weight before something gives.
- Brent crude has nearly doubled since the war began, hitting $126 a barrel and pushing U.S. gas prices to their highest point in nearly four years.
- The Strait of Hormuz — a chokepoint for a significant share of the world's oil — remains closed, and President Trump's rejection of Iran's reopening proposal has extinguished hopes for a swift resolution.
- California drivers are already paying over $6 a gallon, and families filling up twice a week are watching hundreds of extra dollars drain from their budgets each month.
- The Federal Reserve held interest rates steady but issued a quiet alarm: consumer spending has held up so far, yet rising energy costs are steadily eroding the discretionary income that keeps the economy moving.
- Oil markets offered a brief retreat — Brent pulled back toward $114 — but traders and analysts alike treated it as a pause, not a turning point, so long as the conflict and the blockade persist.
Oil prices reached their highest point since the war began in late February, with Brent crude climbing past $126 a barrel and American drivers facing a national average of $4.30 per gallon — the steepest pump prices since the summer of 2022. Before the Iran conflict erupted, Brent was trading near $70. The near-doubling of that benchmark has translated into $1.32 more per gallon for U.S. drivers, with California bearing the sharpest pain at $6.01 a gallon.
What is keeping prices so high is the absence of any visible exit. The Strait of Hormuz, through which a critical share of global oil shipments passes, remains effectively closed. The United States has maintained a blockade of Iranian ports, and on Thursday, reports confirmed that President Trump had rejected Iran's proposal to reopen the strait. Analysts at ING Bank noted that with U.S.-Iran talks broken down and no diplomatic path forward, the prospect of oil flowing freely again seemed only to be receding.
Federal Reserve Chair Jerome Powell addressed the tension directly on Wednesday, holding interest rates steady while acknowledging that elevated energy costs were feeding inflation. He framed the central worry as a question: how long can consumers keep spending if gas prices continue to climb and take ever more money out of their pockets? It was a warning in the shape of an open question — one that policymakers have no clean answer to yet.
Markets offered a brief reprieve, with Brent retreating toward $114 and U.S. crude closing near $105 after a modest decline. But the relief felt provisional. As long as the conflict endures and the strait stays closed, energy markets will remain volatile, and the pressure on American households will continue to build.
Oil prices hit their highest level since the war began in late February, with Brent crude—the global benchmark—climbing past $126 a barrel early Thursday. At the pump, American drivers faced an average of $4.30 per gallon, the steepest price since July 2022. The surge reflects deepening anxiety that the Middle East conflict will persist, choking off the world's energy supply at a moment when markets can least afford the disruption.
The numbers tell a stark story. Before the war started, Brent crude was trading around $70 a barrel. Now it sits nearly double that. Drivers have absorbed the shock: they're paying $1.32 more per gallon than they were before the Iran conflict erupted. In California, where state regulations and refinery constraints already push prices higher, the average hit $6.01 a gallon—the nation's worst. For a family filling up twice a week, the difference compounds quickly into real money.
What's keeping prices elevated is the absence of any clear off-ramp. The Strait of Hormuz, one of the world's most critical chokepoints for oil shipments, remains effectively closed. The United States has maintained a blockade of Iranian ports. And on Thursday, reports surfaced that President Trump had rejected Iran's proposal to reopen the strait, dashing whatever slim hopes traders held for a quick resolution. Analysts at ING Bank noted the market's darkening mood: with talks between Washington and Tehran broken down and no diplomatic path visible, the prospect of oil flowing freely again seemed to recede further.
Fed Chair Jerome Powell acknowledged the tension on Wednesday. The central bank held its benchmark interest rate steady, citing the "elevated" inflation tied directly to surging energy costs. Powell seemed aware of the paradox facing the economy: consumers are still spending, still opening their wallets despite higher gas prices. But he posed the question that haunts policymakers: "How long can that go on in a world where if gas prices were to go up a bunch more, that's taking spendable money out of people's pockets?" It's a warning dressed as a question. If energy prices climb further, households will have less discretionary income. Spending could falter. Growth could slow.
The oil market itself remained volatile. Brent crude for June delivery briefly pierced $126 before retreating toward $114. U.S. crude, the domestic benchmark, declined 1.8 percent to close near $105. The pullback offered a moment of relief, but it felt fragile—a pause rather than a reversal. As long as the Middle East conflict drags on and the Strait of Hormuz stays closed, energy markets will remain on edge, and American consumers will keep paying the price at the pump.
Notable Quotes
The breakdown of talks between the U.S. and Iran, along with President Trump reportedly rejecting Iran's proposal for reopening the Strait of Hormuz, has the market losing hope for any quick resumption in oil flows.— ING Bank strategists Warren Patterson and Ewa Manthey
People are still spending. How long can that go on in a world where if gas prices were to go up a bunch more, that's taking spendable money out of people's pockets?— Federal Reserve Chair Jerome Powell
The Hearth Conversation Another angle on the story
Why does the Strait of Hormuz matter so much that its closure alone can double oil prices?
Because roughly a third of the world's seaborne oil passes through it. When it closes, there's no easy alternative route. You can't reroute a tanker around Africa overnight. The market knows supply is suddenly constrained, so prices spike.
But the U.S. is still producing oil domestically. Why can't that fill the gap?
American production helps, but it's not enough to replace what would normally flow through the strait. And the global market is interconnected—if Middle Eastern oil disappears, prices rise everywhere, including here.
Powell seemed worried about consumer spending. Is he saying the economy could break?
Not break, but slow. Right now people are still buying things despite high gas prices. But there's a limit. If gas hits $5 or $6 a gallon nationally, people start cutting back on other purchases. That ripples through the whole economy.
So the Fed is stuck. They can't lower rates to help because inflation is already high.
Exactly. They're trapped between two bad options. Lower rates and inflation gets worse. Keep rates high and you risk slowing growth. Energy shocks do that to you.
What would actually end this?
Either the war ends, or the strait reopens, or both. Until one of those happens, the market will keep pricing in scarcity. And drivers will keep paying.