The Iran war has proven more disruptive to global energy markets than initially anticipated, and US oil prices keep rising as the conflict enters its third week. Analyst Patrick De Haan has forecast Monday pump prices at $3.80 to $3.85 per gallon, while $4 gasoline remains a realistic near-term possibility. The unexpected scale and duration of the disruption has forced a series of upward revisions in price forecasts across the energy industry.
Markets initially expected a shorter and less severe conflict when the US-Israel campaign against Iran began on February 28. Three weeks later, the national gasoline average has risen 23% to $3.70 from below $3 per gallon, and analysts are revising their outlook higher with each passing week. The depth of the supply disruption caused by the systematic targeting of oil infrastructure and the Hormuz blockade has exceeded the expectations of many energy market forecasters.
Friday’s US strike on Kharg Island, targeting one of Iran’s most vital oil assets, confirmed that the conflict’s impact on energy infrastructure has been more extensive than many market participants initially modeled. Iran’s continuation of the Strait of Hormuz blockade has extended the removal of roughly 20% of global oil supply from international markets well beyond what markets initially anticipated. Brent crude ranged from $103 to $106 per barrel Monday, while US crude held near $94 after briefly touching $100 the previous day.
California faces average pump prices above $5 per gallon, with some Los Angeles stations posting above $8. National diesel costs for commercial transport could reach $5.15 per gallon. Exxon CEO Darren Woods and the leaders of Conoco and Chevron have each updated the White House on the worsening supply picture, with Woods specifically noting that speculative market activity has amplified the already significant price impact of physical supply shortfalls.
Wall Street made modest gains Monday, the S&P 500 rising about 1% as crude prices briefly retreated. Oil company shares have reached record highs since the conflict began. The unexpected depth and duration of the Iran war’s market disruption suggests that US oil prices could remain elevated for longer than most initial forecasts anticipated.
