Why fuel prices may go higher still

If you think your energy costs are high now, the situation may be about to get a whole lot worse.

With traffic in the Strait of Hormuz – normally the primary route for oil leaving the Middle East – , oil prices have before the conflict in Iran began in February 2026 to more than $100 a barrel in mid-September.

When the U.S. and Israel first attacked Iran, or even $200 a barrel. That hasn’t happened yet. But seven months into the conflict, with no clear end in sight, the global oil market has now largely exhausted the safety measures that exist to keep a lid on petroleum prices.

As researchers who study the relationship between and , we have been following these dynamics throughout the conflict, and the oil market is now – and perhaps even shortages – may be on the way.

The squeeze tightens

Some oil has been able to make it out of the Persian Gulf despite the closure of Hormuz. Saudi Arabia increased output via its , which runs from Abqaiq on the Persian Gulf overland to Yanbu on the coast of the Red Sea. At full capacity, that pipeline can carry as much as , although only about 4 million to 5 million barrels per day are typically exported.

But attacks on the pipeline in mid-September that Saudi Arabia blames on Iran-backed militias based in Iraq through that pipeline. The pipeline has now at very low volumes, but it will likely take at least six to eight weeks to regain full capacity. Even this short cessation has tightened already constrained oil markets, and the threat of further will only add to inflationary pressures.

Meanwhile, in Russia, , reducing Russian production of diesel fuel and . That has of the global daily supply of diesel, an . When diesel costs go up, the result is across the global economy.

Feeling the pinch

In the U.S., on Sept. 22, with the national average per gallon.

The high prices prompted President Donald Trump to , a move analysts suggest by accentuating global supply shortages and .

Beyond diesel, , and supply shortages are starting to take hold. For instance, Costco has and has limited the amount customers can buy.

The upshot from all this is that Americans are spending a lot more on fuel in 2026 as compared to 2025. Between March 1 and late September, Americans compared to the same period a year ago, as well as $45 billion more on diesel. That’s $117 billion in additional fuel costs, above and beyond the costs of the war itself, which the Pentagon as of early September.

These shocks are even more acute outside the United States, which is the world’s largest energy producer. South and Southeast Asian countries, which were more reliant on imports from the Persian Gulf than the United States, were hit hard soon after the war broke out. Some of them have had to , while others enacted emergency measures like shortening the work or school week to .

These challenges are now hitting Europe hard as well. On Sept. 20, some 15% of French service stations had reportedly .

Limited tools left

The international community has already taken most of the measures available to curb oil demand and boost its supply. Those moves have reduced the scale of oil price increases, but they did not prevent them entirely. Now, the toolbox is largely empty, leaving prices on the brink of spiking again.

In March 2026, a coordinated effort among 32 countries into the global market from those countries’ strategic reserves. Those stockpiles are now substantially depleted, and it is not clear how much additional oil that countries will be willing or even able to release as the war continues.

Since the war began, the United States alone has , leaving its reserves at a . The U.S. may not be able to release much more without compromising the where the Strategic Petroleum Reserve is stored.

The role of China

has played the largest role in containing global oil prices to date by releasing official reserves as well as what now seem to be massive . The country reduced its between February and June 2026.

The increased electrification of the Chinese economy played a key role in reducing during this period. in China are electric vehicles or plug-in hybrids, and are now electric.

Overall, China’s electrification of its transport sector allowed it to in the first half of 2026.

Other countries are for help as well. The country’s international , as other countries seek to insulate themselves from oil market shocks.

Less encouragingly when it comes to greenhouse gas emissions, China has to offset oil demand and as an alternative means of petrochemical production as well.

Of perhaps more immediate concern, China’s oil demand is now starting to creep up again, as compared with the previous month. Even if its imports don’t reach prewar levels any time soon, increased Chinese demand, coupled with a tighter oil market, may result in additional price hikes over the next few weeks.

China still has about four to six months of stockpiles, including commercial and strategic reserves, but Beijing may soon seek to gradually , although the Chinese may postpone these purchases if prices continue to soar.

A look ahead

Sustained conflict in Iran – – continued disruptions of oil shipments in the Strait of Hormuz, and Iran-linked militias’ could mean the reemergence of the when the fighting began.

It’s not clear if that would translate into simply much higher prices at the pump or turn into , where there’s not enough fuel available at any price and lines stretch around the block at gas stations.

With the 2026 midterm elections looming, the White House will want to avoid that scenario at all costs. But the Trump administration has already and has rejected policies that would have reduced oil demand, such as stricter or incentives for adoption.

At this point, Trump has relatively few options available to blunt new price shocks, the effects of which may be visible not just at the pump but also at the ballot box.