The U.S.-Israeli conflict with Iran has pushed gasoline prices higher after fighting disrupted the Strait of Hormuz, a key route for global oil shipments. Consumers initially hoped a reopening of the strait would allow a quick price recovery, but recent retaliatory strikes on oil and gas facilities across the Middle East have all but eliminated that possibility, analysts told ABC News.
Those attacks, which have targeted refineries, terminals and pipelines, could take months — or longer — to repair, lengthening a global fuel shortage and raising the risk of a sustained oil shock that would further strain an already fragile U.S. economy. Higher energy costs would hit households coping with elevated inflation and a tight labor market.
“Both sides have taken the gloves off when it comes to attacks on infrastructure — and that’s just bad news for everyone,” said Severin Borenstein, a professor of business administration and public policy at UC Berkeley.
Iran carried out a series of strikes on energy infrastructure in nearby Gulf countries after Israel struck Iran’s largest gas field. Among those strikes, Iran hit Ras Laffan in Qatar, the world’s largest liquefied natural gas (LNG) export terminal — the most significant attack on Qatari energy facilities since the war began.
The U.S. has taken measures to try to cool oil prices, including a release from the Strategic Petroleum Reserve, easing sanctions on Russian oil and suspending a domestic oil-transport regulation. Still, attacks on key facilities pushed global crude as high as $119 a barrel before it settled near $109; prices have risen more than 50% over the past month.
U.S. retail gasoline averaged $3.91 per gallon, an increase of 98 cents from a month earlier, according to AAA. Diesel prices have also surged, threatening to raise shipping and production costs across the U.S. supply chain and pushing up prices for groceries, clothing and other goods.
“Even if you had hostilities end immediately, it would still take time to get those facilities repaired and back to full capacity,” said Timothy Fitzgerald, a University of Tennessee professor who studies the petroleum industry. “The longer those key input costs are higher, the greater the pressure on the entire economy.”
Inflation sits at about 2.4%, down from earlier highs but still above the Federal Reserve’s 2% target. The attack on Ras Laffan, which typically ships roughly one-fifth of global LNG, reduced Qatar’s export capacity by about 17% and cost the country an estimated $20 billion in annual revenue, QatarEnergy said. The company warned repairs could take up to five years.
Iran also struck energy sites in Israel, Kuwait and the United Arab Emirates, among others. Analysts warn the cumulative damage could reduce global production capacity and slow overall economic output.
“If you have less oil and gas, the global economy is able to produce less stuff. The economy slows down,” Borenstein said. He and other experts note the U.S. is in a stronger position than many countries because it is a net oil exporter, but U.S. prices remain tied to the global market and are vulnerable to international supply disruptions.
Repair work at damaged facilities is likely to wait until hostilities subside and sites can be secured, and lingering geopolitical tensions could keep prices elevated even after reconstruction. “Even if these facilities are rebuilt, there’s no guarantee they won’t be attacked again,” said Robert Weiner, a professor of international economics at George Washington University. “Going forward, that will raise the level of uncertainty.”