A person refuels his semitruck at the Pilot Traveler Center in Lockhart, Texas, on March 9, 2026.
Brandon Bell | Getty Images
The US economy is more vulnerable than ever to energy market crises caused by the Iran war. The economy has been incredibly strong, but the buffers that have protected Americans from previous inflation are wearing thin.
The bottom line: The war will destroy the standard of living of the American people this summer even if the actual fighting remains contained than during the first phase of the conflict.
In President Donald Trump’s view, now that he has begun to return to direct conflict with Iran, there is little he can do to protect the American people from economic collapse.
The White House says the president is loyal to the American people and rates will drop soon. “As U.S. forces degrade the terrorist regime of Iran’s ability to attack commercial shipping and disrupt the free flow of energy in the Strait of Hormuz, oil and gas prices will decline back to pre-conflict levels,” said Taylor Rogers, a White House spokesman, in an email.
Anyone who has filled a pump in recent days has felt the pain. The national average price at the tap was $4.06 a gallon Wednesday, up 4.4% from $3.89 the previous week, according to AAA.
That hurts. But for the full economic impact, look at diesel, “because that’s the backbone of the US economy,” said Christian Lawrence, head of Americas and energy market strategy at Rabobank.
The US Energy Information Administration’s average for diesel jumped nearly 34 cents last week to $5.13 a gallon, the biggest weekly climb since the first week of the war in March. Those figures are used to determine fuel surcharges that airlines and other companies charge customers, which can raise prices throughout the economy.
We’ve been here before, of course. The start of the war in March saw a rise in oil prices followed by oil and gas and diesel prices, but they fell when the firing stopped for a while a few weeks later. With occasional reports that the US and Iran are trying to accelerate a new ceasefire in hostilities, it may seem that a return to low prices is the post of the President of Public Truth.
Unfortunately, that’s where things have changed, especially for the economically important diesel.
“There’s a little bit of an asymmetric relationship in that, if oil goes up, then diesel prices go up,” Lawrence said. “If oil goes down, diesel prices may go down a bit, but they will still be very high.”
Problems have been piling up in the refining sector that turns crude oil into refined products that are pumped into cars and trucks. US refineries are at 96.1% of capacity, the EIA said on Wednesday.
If refineries can produce more at that rate, they can. US refineries went into overdrive when the war began to help produce jet fuel and other products for European markets that found themselves cut off from their suppliers in the Middle East.
The inventory that was drawn down at the beginning of the war must not be replenished during the summer demand. The EIA reported last week that storage at a key delivery facility in Cushing, Oklahoma, since early June has been at the so-called tank bottom, the level at which the remaining liquid cannot be pumped out.
The Strategic Petroleum Reserve fell to 311 million barrels, its lowest level since March 1983, according to EIA data.
Iran isn’t the only war going on, either. Ukraine has hit 24 of Russia’s 34 major refineries in the past three months, analysts with BofA Global Research note. Russia has shifted from a supplier of diesel and other products to an importer, as China tries to restore its own supply.
More oil is entering the Strait of Hormuz now than during the crisis in March, according to the International Energy Agency, as attacks on ships in the waters continue to be dangerous.. But that oil doesn’t help anyone until it becomes something useful for the world economy. That makes benchmark prices like Brent crude, at $94 a barrel on Wednesday, less important as an indicator than the prices buyers actually pay.
None of this amounts to an immediate economic crisis, but it adds to the pressures of insolvency that have weighed on Americans for years. Inflation data delivered a pleasant surprise last week when the consumer price index came in at a better-than-expected 3.5% in June. But the relief is likely to be temporary. Higher gas prices will eat into wage gains and force Americans to dig deeper into their savings.
The CNBC All-America Economic Survey released last week found 37% of US voters said they use credit cards more often to pay for things because of high food and gas prices. That’s up 6% from April as the war drags on.
The management tried to stop the bleeding. It directed major oil exports to the SPR, eased restrictions on where ships can carry fuel and other supplies, and eased sanctions on Russian and Iranian oil. All of these moves are arguably already priced into the market, however, and it’s not clear that there are more levers that management can pull in the short term.
An indefinite end to the conflict will lower oil prices, but gas and diesel may hold high at least through Labor Day, when the end of summer has fewer people on the roads. The increase in demand will eventually lead to the construction of refineries.
“But this takes time. There is no short-term solution,” said Lawrence.
