Oil prices hit wartime peak, pushing U.S. gas costs to highest since level July 2022

Oil prices surged to a wartime high Thursday, with Brent crude, the international benchmark, topping $126 a barrel as concerns grew that the Iran war will drag on, tightening global energy supplies. 

Gasoline prices also reached a new high since the Middle East conflict began on Feb. 28, with the average U.S. cost jumping to $4.30 a gallon, according to AAA. That represents the highest prices at the pump since July 2022.

American drivers are now paying $1.32 more per gallon than they did before the Iran war. Drivers in California are facing the nation’s highest gas prices, averaging $6.01 per gallon on Thursday, according to AAA data.

With no end to the war in sight, energy markets are concerned about the impact on oil supplies. Reports Thursday suggesting a possible escalation by President Trump doused hopes for a quick end to the conflict, while the Strait of Hormuz remains effectively closed and the U.S. has continued its blockade of Iranian ports.

“The breakdown of talks between the U.S. and Iran, along with President Trump reportedly rejecting Iran’s proposal for a reopening of the Strait of Hormuz, has the market losing hope for any quick resumption in oil flows,” ING Bank strategists Warren Patterson and Ewa Manthey wrote in a research note.

Although high U.S. gas prices could cause consumers to cut back on spending, for now Americans are continuing to open their wallets, Federal Reserve Chair Jerome Powell said on Wednesday in discussing the central bank’s latest interest rate decision. The Fed maintained its benchmark rate at its current level, citing “elevated” inflation tied to the “recent increase in global energy prices.”

“People are still spending. How long can that go on in a world where if gas prices were to go up a bunch more, that’s taking spendable money out of people’s pockets?” Powell said in a press conference. 

Brent crude to be delivered in June briefly soared past $126 per barrel before pulling back toward $114. Benchmark U.S. crude declined 1.8% to $104.97. Before the war began in late February, Brent crude was trading around $70 per barrel.