American drivers may not have seen the worst of the pain at the pump yet, as energy analysts warn gasoline prices are poised to rise further after oil markets began pricing in the growing impact of the war involving Iran and the mounting disruption to global energy supplies.
National average gasoline prices have already climbed above $4 a gallon, while crude oil has surged past $100 per barrel following weeks of escalating military action across the Middle East. However, experts say the latest rally could be only the beginning if fighting continues and supply disruptions worsen.
“What we’re seeing now is the market beginning to catch up with reality,” Bob McNally, founder of Rapidan Energy Group and a former energy adviser in President George W. Bush’s administration, told The Washington Post.
“This has been one of the biggest cases of energy market mispricing in modern times,” McNally added. “Some of the prices we’ve seen during this conflict have just been unaligned with the fundamentals. I think July will be the month we snap back to reality. The latest outbreak of violence could really send oil prices a lot higher.”
The latest escalation comes after renewed military strikes between the United States and Iran in the Hormuz Strait and the broader region. Tehran has expanded attacks targeting U.S. military facilities as well as critical energy infrastructure in Saudi Arabia, Qatar and the United Arab Emirates.
Meanwhile, Iran-backed Houthi militants in Yemen have intensified pressure on global shipping by blockading vessels headed toward Saudi Arabia through the Red Sea, creating additional bottlenecks for oil and natural gas exports.
The conflict has now stretched for five months, leaving oil inventories significantly lower than they were when the fighting began. Damage to refineries, export terminals and shipping routes has also reduced the flexibility that previously helped stabilize global energy markets.
Early predictions that oil would soar to $200 per barrel and gasoline would exceed $5 a gallon never materialized, largely because governments and energy companies found ways to soften the initial shock.
Countries released strategic petroleum reserves, China relied heavily on its domestic stockpiles while reducing imports, and energy producers redirected cargoes through alternative trade routes. Seasonal factors also helped, as the conflict erupted during a period of relatively weak fuel demand.
According to analysts, many of those temporary buffers have now been exhausted. “The key buffers that got us through the first months of the supply shock have been worn away,” Ben Cahill, an energy scholar at the University of Texas at Austin, told The Washington Post.
“It will be harder to avoid a price correction and a steep price reaction when new disruptions are happening each day. They are already having a bigger impact on market psychology now.”
Demand is also rising just as supplies are becoming more constrained. The summer driving season is increasing gasoline consumption across the United States and Europe. At the same time, China has begun returning to international oil markets after relying on emergency reserves earlier in the conflict.
At the same time, countries that tapped strategic reserves now face the challenge of rebuilding depleted inventories. Compounding the situation, Ukrainian drone strikes have disabled several Russian refineries that play a major role in global diesel production, tightening supplies of another critical transportation fuel.
According to AAA, the national average diesel price reached approximately $5.20 per gallon this week. A report released Thursday by Democrats on the Congressional Joint Economic Committee estimated that American farmers spent roughly $1.4 billion more on diesel during this year’s planting season than they did in 2025.
Some analysts believe investors had underestimated how long the conflict would last. Shon Hiatt, an energy scholar at the University of Southern California’s Marshall School of Business, said markets had largely expected political pressure to bring a relatively quick end to the fighting.
“Everyone had been making this bet that Trump would chicken out when things got bad, pull out and the war would end,” Hiatt told The Washington Post. “But that hasn’t happened. It is not clear when this will end. “As that assumption fades, traders are increasingly factoring in the possibility of a prolonged disruption to global energy supplies.
Capital Economics warned clients this week that if the Strait of Hormuz remains heavily disrupted, oil markets could reach a “tipping point” over the coming months, potentially driving crude prices another 20% higher, and that China wouldn’t be able to “bail out the oil market forever.”
