Brace Yourself for Higher Gas Prices

The Middle East has long been a geopolitical powder keg, and few potential conflicts have as much capacity to shake global markets as a war between Israel and Iran. These two regional powerhouses have been locked in a shadow war for decades, involving proxy battles, cyber attacks, and threats of direct confrontation. However, if a full-scale war were to erupt between Israel and Iran, one of the most immediate and damaging consequences would be a sharp and sustained increase in global gas prices.

This escalation in gas prices would not be merely speculative - it would be driven by several concrete, interconnected factors, including disruptions to oil supply chains, the targeting of critical infrastructure, the closure of key maritime chokepoints like the Strait of Hormuz, global market panic, and broader geopolitical realignments. Each of these factors can trigger price spikes on their own, but in the case of a war involving Israel and Iran, they would likely converge, leading to a perfect storm for the energy sector and a significant economic burden for consumers worldwide.

1. Disruption of Oil Supply from the Persian Gulf

Iran is a major oil producer, ranking among the top countries with the largest proven oil reserves. While Western sanctions have significantly curtailed Iran’s oil exports in recent years, it still contributes millions of barrels per day to the global market, particularly through sales to China and other Asian nations. A war with Israel would likely involve air strikes on Iranian infrastructure, including oil production facilities, refineries, and pipelines. This would immediately reduce Iran’s capacity to export oil.

Moreover, any conflict would deter foreign companies and buyers from engaging with Iranian oil due to increased risks, sanctions enforcement, and logistical uncertainties. Even a temporary halt in Iran’s oil exports would create a supply vacuum, pushing prices upward as importers scramble to find alternative sources.

2. Threats to the Strait of Hormuz

Perhaps the most alarming and impactful consequence of a potential Israel-Iran war is the threat to the Strait of Hormuz, the narrow waterway through which approximately 20% of the world’s petroleum passes. Iran has repeatedly threatened to close or disrupt this chokepoint in response to Western aggression or sanctions. In a war scenario, this threat would likely become a reality.

If Iran were to mine the Strait or use its naval forces, including fast-attack boats and submarines, to harass or block tanker traffic, the result would be an immediate spike in oil prices. Insurance costs for shipping through the region would skyrocket, and many companies might refuse to send vessels through the area altogether. Even a partial disruption of this vital corridor could send oil prices soaring to unprecedented levels.

3. Retaliatory Attacks on Regional Oil Infrastructure

A war between Israel and Iran would not remain confined to their borders. Iran has influence over a network of proxy groups throughout the Middle East, including Hezbollah in Lebanon, militias in Iraq, and the Houthis in Yemen. These groups have demonstrated capabilities to target oil infrastructure in allied countries such as Saudi Arabia and the United Arab Emirates.

For example, the 2019 drone and missile attack on Saudi Aramco facilities, attributed to Iranian-backed forces, temporarily cut Saudi oil output in half and caused a brief but significant spike in global prices. In a full-blown war, Iran would likely activate these proxies to strike oil fields, pipelines, and ports in rival states, causing further supply disruptions and triggering panic in energy markets.

4. Global Market Volatility and Speculation

Oil prices are not determined solely by supply and demand fundamentals- they are also heavily influenced by market sentiment, speculation, and risk perception. The mere announcement or credible threat of war between Israel and Iran would send financial markets into turmoil. Traders anticipating supply shocks would drive up futures prices, and the psychological impact on consumers and investors would ripple through the global economy.

Energy companies, fearing future shortages, would begin to hoard resources, reducing availability for the open market. Airlines, logistics firms, and manufacturers would raise prices to offset expected fuel cost increases, contributing to inflation across sectors. In this environment of uncertainty, even countries with little direct reliance on Middle Eastern oil would feel the pinch of higher energy costs.

5. Strategic Reserves and Limited Alternatives

While major economies like the United States, China, and members of the European Union maintain strategic petroleum reserves, these stockpiles are designed for temporary disruptions- not prolonged geopolitical crises. In the event of a protracted conflict, these reserves could be depleted quickly, especially if global production fails to ramp up fast enough to compensate for lost Middle Eastern supply.

Moreover, few countries can increase output significantly on short notice. U.S. shale producers, for instance, face long lead times and regulatory hurdles. OPEC nations may be reluctant to open the taps too much, especially if the war boosts their revenues through higher prices. As a result, the world would find itself with limited short-term options to stabilize prices, compounding the impact of the crisis.

6. Geopolitical Realignment and Sanctions Fallout

A conflict between Israel and Iran could also trigger new rounds of international sanctions, further restricting oil trade. The U.S. and its allies might impose tighter restrictions on Iran’s oil exports, while countries aligned with Iran (such as Russia or certain factions in Iraq and Syria) could retaliate by limiting cooperation with Western energy initiatives. Such geopolitical realignments would fragment global energy markets, reduce efficiency, and increase costs.

China and India, two of the world’s largest oil consumers, would likely face dilemmas in securing reliable supplies, especially if forced to choose sides in the conflict. This uncertainty would increase global competition for available oil, leading to bidding wars and driving prices even higher.

7. Impact on Transition to Renewable Energy

Finally, while a war in the Middle East might appear to benefit the renewable energy sector in the long term by highlighting the dangers of fossil fuel dependence, in the short term, it could actually slow the energy transition. Governments facing immediate energy crises often resort to short-term fixes like increasing coal production or subsidizing gasoline, which can derail green energy investments. Additionally, economic strain caused by high gas prices could reduce funding and political will for renewable projects.

Conclusion

A war between Israel and Iran would be catastrophic on many fronts- humanitarian, geopolitical, and economic. One of the clearest and most immediate global effects would be a sharp increase in gas prices. Driven by disrupted supply routes, threats to vital infrastructure, speculative panic, and a reshuffling of international alliances, the cost of oil and gas would soar, with consequences felt in every corner of the globe.

From filling up a car in Los Angeles to powering a factory in Beijing, no economy would be immune. The interconnected nature of global energy markets means that even a regional conflict in the Middle East has the power to plunge the world into an energy crisis. Preventing such a war, therefore, is not just a regional concern- it is a global imperative.