When the United States and Israel conducted strikes on Iran on February 28, Tehran responded by restricting traffic through the Strait of Hormuz, a critical waterway carrying roughly one-fifth of global oil and refined products. Trading desks issued alarming forecasts, with some predicting crude prices could reach $150 or even $200 per barrel—numbers that would have devastated household budgets nationwide.
Those catastrophic projections did not materialize. Brent crude futures peaked around $126 a barrel, remaining below the 2008 record of $147, and averaged roughly $101 between the conflict’s onset and June 11 before retreating to prewar levels near $70 in early July. West Texas Intermediate, the U.S. benchmark, fluctuated between roughly $68 and nearly $113. The national average for regular gasoline peaked at $4.56 on May 21 and stood near $4.02 by late July, up from $2.98 on the day fighting commenced, but far below what $150 crude would have produced.
Multiple factors prevented the doomsday scenario. China, the world’s largest oil importer, reduced crude purchases to their lowest level in nearly a decade by June and accelerated the shift toward electric taxis. U.S. domestic crude production reached a record 13.93 million barrels daily by April, while Washington released 400 million barrels from the Strategic Petroleum Reserve as part of a coordinated International Energy Agency effort. Saudi Arabia rerouted significantly more crude through its Red Sea port at Yanbu, partially offsetting barrels stranded behind the Strait of Hormuz. Additionally, traders stopped aggressively chasing geopolitical headlines, with market liquidity thinning and investors avoiding large bullish positions.
For households, the avoided scenario carried substantial implications. Every $1 movement in crude typically translates to roughly 2.4 to 2.5 cents per gallon at the pump. A $150 forecast would have pushed the national average near $5.60, exceeding the all-time record of $5.02 set in June 2022. A $200 barrel would have produced prices near $6.80. A typical two-car family consuming 1,000 gallons annually would have faced approximately $1,600 to $2,800 in additional annual costs under those scenarios.
Looking forward, the shock absorbers that prevented catastrophe are limited. The Strategic Petroleum Reserve fell to 311.4 million barrels, its lowest level since March 1983, and has depleted by over 104 million barrels since the conflict began. China cannot substantially cut imports further, and Saudi Arabia’s Red Sea rerouting exposes roughly 2.5 million barrels daily to Houthi threats. Should a ceasefire fail to materialize, geopolitical analysts cautioned that oil price rebounds could become substantial, with pump prices likely to rise in the near term once current downward momentum ends.
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