The Brief

The average price of regular gasoline in the United States has risen to $3.48 per gallon — a 17% increase in one week — after the de facto closure of the Strait of Hormuz disrupted roughly a fifth of global oil supply. Crude oil briefly touched $120 a barrel on Monday, the highest level since 2022, and economists warn that March inflation could reach 1% month-over-month, the steepest monthly increase in four years.

The Report

American drivers are paying an average of $3.48 per gallon of regular gasoline as of Monday morning, up 48 cents from a week ago and 58 cents from a month ago, according to AAA. The spike follows the effective closure of the Strait of Hormuz, through which approximately one-fifth of global crude oil and liquefied natural gas transits, after Iranian forces warned that vessels attempting passage “would be targeted.” Tanker traffic through the strait has dropped by roughly 70%, with over 150 ships anchoring outside the chokepoint. Maersk, the world’s second-largest container shipping company, has suspended all crossings.

Regional variation is sharp. California drivers are paying $5.20 per gallon, Washington state $4.63. Kansas remains the cheapest at $2.92. Diesel has climbed to $4.66 per gallon — up 89 cents in a single week — with knock-on implications for freight and food distribution costs.

West Texas Intermediate crude spiked to nearly $120 a barrel in early Monday trading before retreating to settle at $94.77. Brent crude followed a similar trajectory, touching $120 before easing toward $95. U.S. crude logged its largest weekly gain on record in data going back to 1983. Rapidan Energy has characterised the disruption as the largest oil supply shock in history, exceeding the Suez crisis of 1956 in both scale and duration.

Patrick De Haan of GasBuddy projected that pump prices would stabilise between $3.50 and $3.65 if oil continued retreating, calling a sustained national average above $4 “much less likely” at current crude levels. David Kelly of J.P. Morgan was less sanguine, warning that high prices could persist through the autumn as summer driving demand compounds the supply shock. Ian Bremmer of Eurasia Group noted that Americans “feel the impact of higher gas prices every week when they fill their car tank” and suggested $4 gasoline remained a realistic threshold.

Goldman Sachs analysts projected that if oil gains persist, annual CPI inflation could accelerate from 2.4% in January to 3% by year’s end. The 10-year Treasury yield rose 6.6 basis points to 4.198% on inflation expectations. The CME FedWatch tool showed a 97.4% probability that the Federal Reserve would hold rates unchanged at its March meeting, with the oil shock complicating incoming chair Kevin Warsh’s stated preference for cuts.

Pressure is mounting on President Trump to tap the Strategic Petroleum Reserve, which currently holds 415 million barrels — about 58% of its authorised capacity. G7 energy ministers are convening Tuesday to discuss a coordinated release of 300 to 400 million barrels. The Trump administration has instead moved to insure commercial vessels transiting the strait with up to $20 billion in federal coverage. Damage to Saudi oil infrastructure and Qatari LNG complexes — Qatar accounts for nearly 20% of global LNG exports — has added a production dimension to what began as a transit disruption.

The price at the pump on Inauguration Day in January 2025 was $3.11.

The Angle

The immediate question — how high, how long — is the one being asked. The more structural question is what the price spike reveals about something that was supposed to have been fixed. The United States produces more oil than any country in history. It is, by the numbers, energy independent. And yet a maritime chokepoint 7,000 miles away moved the price Americans pay at the pump by 17% in seven days. Independence, it turns out, is not the same as insulation. Global commodity pricing means American crude trades at global prices, and global prices are set at the narrowest point in the supply chain — which this week was a 21-mile-wide strait between Iran and Oman.

The political irony is precise. The administration that made “drill, baby, drill” the centrepiece of its affordability agenda is now presiding over the fastest gas price increase since the post-Ukraine spike of 2022 — driven not by supply constraints at home but by a military operation it chose to initiate. The Strategic Petroleum Reserve, drawn down significantly during the Biden years and never fully replenished, holds 58% of capacity. The tool exists. The margin does not.

What the next several weeks will test is not whether the disruption can be managed — G7 coordination and retreating crude futures suggest it can, eventually — but whether the inflation already baked in can be contained before it compounds. Diesel at $4.66 does not stay in the fuel column. It migrates into food prices, freight surcharges, and consumer sentiment indices within weeks. Goldman’s projection of 3% annual CPI by December assumes the shock is temporary. The infrastructure damage in Saudi Arabia and Qatar suggests it may not be entirely up to the calendar.

The infrastructure of the industrial world was built on geography it does not control. This week that stopped being theoretical.