The price of oil surged Sunday after U.S. and Israeli strikes on Iran, which killed its supreme leader.
U.S. crude oil initially soared more than 10%, while Brent, the international oil benchmark, surged as much as 13% when trading opened on Sunday. The rally moderated after a few hours but both were still up more than 5% as of 10:20 p.m. ET. For U.S. crude oil, the move pushed prices higher by more than $3 per barrel.
Even before the weekend’s escalation, oil prices had risen 17% this year off President Donald Trump’s ramped-up rhetoric against the Iranian regime. The Trump administration has also ratcheted up sanctions on Iran in recent months.
Retail gas prices move about 2.5 cents for every $1 move in the price of crude oil, so already a nearly 10 cent-per-gallon increase could be on the horizon for consumers. Price hikes at the gas pump could start as soon as Monday, GasBuddy analyst Patrick De Haan said.
“I fully expect that by Monday night, you could credibly say that gas prices are being impacted by oil prices having gone up,” he said.
“It won’t be a spike,” De Haan said, but still warned that gas stations will likely start passing along price hikes this week.
While Iran’s oil production is estimated to be less than 5% of global output — most of which goes to China because of U.S. sanctions — it has major influence over the Strait of Hormuz, a critical passageway for more than 20% of the world’s daily oil demand.
A closure or restriction there can quickly rock the global oil market, and it would be among the worst-case scenarios for the oil market, longtime industry analyst Andy Lipow said Sunday.
On Saturday and Sunday, at least six of the leading cargo shipping companies said they were halting or diverting ships that were originally set to sail through the key waterway.
“Historically, geopolitical oil shocks fade quickly, but if this episode lasts longer, markets may see extended volatility,” Luis Costa, Citigroup’s global head of emerging markets strategy, wrote in a note on Sunday night.
