Gasoline prices across the United States climbed again on Tuesday, reaching an average of $3.54 per gallon, according to data released by the American Automobile Association (AAA). The increase reflects growing pressure on global energy markets following escalating tensions in the Middle East.

Since the recent military strikes by the United States and Israel against Iran, gasoline prices have surged approximately 19 percent. The conflict has raised concerns about the stability of energy infrastructure throughout the Persian Gulf, a region that plays a central role in the global oil supply chain. Oil production facilities, storage hubs, and major shipping routes connected to the Gulf are all seen as vulnerable during periods of geopolitical instability.

Financial markets have responded quickly to the uncertainty. Crude oil prices, which represent the largest component of gasoline costs, have increased by roughly 24 percent since the conflict began. Traders remain cautious, worried that disruptions to shipping routes and production facilities could last longer than expected.

These developments highlight the critical importance of the Persian Gulf to the world’s energy system. Even countries that produce significant amounts of oil domestically, such as the United States, are deeply influenced by shifts in global supply and demand.

Understanding How Gasoline Prices Are Set

Gasoline prices are largely determined by several major components, with crude oil being the most significant. According to the U.S. Energy Information Administration, crude oil accounted for about half the price of a gallon of regular gasoline in its most recent estimate.

The remaining portion of the price includes refining costs, transportation and distribution expenses, and federal and state taxes. Large energy companies handle much of the refining and distribution process, which can cause price differences between regions. Gas station owners have limited flexibility in setting prices, typically adjusting them by only a few cents per gallon depending on local competition and operating costs.

Because crude oil makes up such a large share of gasoline’s cost, any major change in global oil prices can quickly affect the price drivers see at the pump.

Why Middle East Disruptions Affect American Drivers

Oil is traded on a global market, meaning that its price is influenced by worldwide supply and demand rather than just domestic production. When conflicts, natural disasters, or economic changes affect supply or demand anywhere in the world, prices can shift rapidly.

American refiners purchase oil based on international benchmark prices established in commodity markets. Two of the most widely used benchmarks are Brent Crude and West Texas Intermediate. These benchmarks reflect the price traders are willing to pay for oil delivered either immediately or at a future date.

Since the start of the recent conflict, futures contracts for West Texas Intermediate crude have increased by roughly 30 percent. This surge indicates that traders expect tighter supplies or potential disruptions in the near future.

According to Christopher Knittel, associate dean for climate and sustainability at the Massachusetts Institute of Technology, supply disruptions in the Middle East tend to affect oil prices globally. When oil becomes more expensive worldwide, the increase eventually flows through to refined products such as gasoline, diesel, and jet fuel.

In other words, even if American drivers are filling up with domestically refined fuel, the price of that fuel still reflects conditions in the global oil market.

Why the U.S. Still Imports Oil

The United States is currently the largest oil producer in the world, but that does not mean the country relies exclusively on domestic crude oil. In fact, the U.S. both imports and exports large volumes of petroleum.

According to data from the U.S. Energy Information Administration, the United States imported about 200 million barrels of crude oil in December alone. During that same month, it exported more than 350 million barrels of petroleum products, including gasoline, diesel fuel, jet fuel, propane, and roughly 128 million barrels of crude oil itself.

One reason for this complex trade pattern lies in the type of crude oil produced domestically. Much of the oil extracted in the United States is considered “light sweet crude,” which has relatively low sulfur content and is easier to refine. However, many American refineries were originally designed to process heavier and more sulfur-rich crude oil.

As a result, it can sometimes be more cost-effective for energy companies to export light crude and import heavier varieties that better match refinery capabilities.

Reconfiguring refineries to handle different grades of crude would be extremely expensive and technically challenging. According to Willy Shih of Harvard Business School, modifying these facilities would require significant investment and years of engineering work.

Another factor influencing oil transportation is the Jones Act. This federal law requires that goods transported between U.S. ports must travel on ships that are built, owned, and operated by American companies. Because compliant vessels can be limited and costly, it can sometimes be cheaper for refineries to import oil from overseas rather than move it domestically.

For example, a refinery in New Jersey might find it more economical to import crude oil from countries like Algeria or Nigeria rather than ship oil from Texas.

How Governments Respond to Rising Prices

Energy analysts generally agree that national leaders have limited direct influence over oil prices, which are largely determined by global markets. However, governments do have certain tools they can use in emergencies.

One of the most significant is the Strategic Petroleum Reserve, the largest emergency crude oil supply in the world. The reserve has the capacity to store up to 714 million barrels of oil.

In 2022, after the Russian invasion of Ukraine triggered a sharp spike in fuel prices, President Joe Biden authorized the release of millions of barrels from the reserve in an effort to stabilize the market. While such releases can temporarily increase supply and ease price pressure, experts say the effect is usually short-lived.

Another possible response would be expanding domestic oil production, but that process requires significant time. Opening new drilling sites, especially in environmentally sensitive areas, involves regulatory approvals, infrastructure development, and drilling operations that can take months or even years.

As Professor Knittel noted, even if policymakers decided today to expand drilling in new regions, the additional oil would likely not reach the market for at least six months.

Recent Statements from the Trump Administration

Officials from the Group of Seven, a coalition of major industrialized economies, indicated earlier this week that they were not yet concerned about a severe fuel shortage. The group continues to monitor developments in the global energy market as the situation in the Middle East evolves.

Meanwhile, President Donald Trump has delivered mixed signals about the conflict. In a Monday phone interview with CBS News, he suggested that the military situation appeared largely settled.

However, only hours later he warned that the United States could take stronger action if Iranian authorities attempted to disrupt global energy supplies by blocking shipping routes or targeting oil infrastructure.

For now, global markets remain on edge. As tensions persist in one of the world’s most important energy regions, gasoline prices in the United States will likely continue reflecting the uncertainty surrounding global oil supply.