The prospect of peace negotiations may have calmed down reeling markets, but the weekslong U.S.-Iran war had not only already eaten into American wallets by pushing up gas prices, but also ramped up cost-of-living pressures in the rest of the world. And while U.S. and Iranian officials are set to meet this weekend to begin charting a way out of the war, analysts tell TIME that palpable effects on the pump—and on other commodities—might not be felt for some time.
Jamus Lim, associate professor of economics at ESSEC Business School, tells TIME that even if the ongoing cease-fire eventually leads to the reopening of the Strait of Hormuz, a key maritime route where about a fifth of the world’s global oil consumption passes through and which Iran has effectively choked since the war broke out, the war has already depleted inventories of various commodities, including oil and natural gas. While Lim said that a clear timeline may be difficult, he projected that crude oil trading prices would hover at around $100 a barrel until the end of summer.
Goh says the war has taken 10 to 11 million barrels of crude oil offline per day, and the inventory drawn down to manage the situation will need to be replenished. High demand caused by replenishing the lost oil stock will keep prices elevated, she said.
“You need to make those ship owners convinced that it is safe,” Xu tells TIME. “Nobody really wants to take the risk.”
What to expect at the pump
Because of the war, prices of gasoline—the refined product from crude oil—in the U.S. have risen to above $4 a gallon, the highest since the war between Russia and Ukraine began in 2022, and a dollar more expensive than in February, before the hostilities.
Fuel prices, according to central bank economists, go up like “rockets” and down like “feathers,” and Aw from Coface says that even if oil prices ease immediately, consumers typically see partial relief in retail fuel prices only after a month or two. The lag, Aw says, reflects “the layered structure of pricing—existing inventories, refining margins, distribution costs, and taxes all play a role.”
A constantly evolving situation in the Middle East will also affect each vendor and each station’s fuel supplies. But should the hostilities end, consumers will “certainly be relieved that prices are not escalating further,” says ESSEC Business School’s Lim.
—Miranda Jeyaretnam contributed reporting.
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