Prices surged in March after oil shock set off by Iran war
A view of the vessels passing through the Strait of Hormuz following the two-week temporary ceasefire reached between the United States and Iran on the condition that the strait be reopened, seen in Oman, April 8, 2026. (Anadolu via Getty Images)
(NEW YORK) — Inflation surged in March after an oil shock triggered by the U.S.-Israeli war with Iran, government data showed on Friday. The inflation report matched economists’ expectations.
Prices rose 3.3% in March compared to a year earlier, marking a steep rise from a year-over-year inflation rate of 2.4% in the prior month. Annual inflation jumped to its highest level in two years, U.S. Bureau of Labor Statistics (BLS) data showed.
The jump in prices owed in large part to a sharp rise in costs for products impacted by the oil shortage. Gasoline prices were 25% higher in March than February, the BLS report said. Overall, energy prices jumped almost 12% from a month earlier.
Airline fares increased 3.4% in March from February, the data showed.
The rapid acceleration of price increases could complicate interest rate policy at the Federal Reserve, which may be reluctant to lower borrowing costs as inflation climbs.
The Middle East conflict prompted Iran’s effective closure of the Strait of Hormuz, a critical waterway that facilitates the transport of about one-fifth of the global supply of oil and natural gas.
That energy shortage sent oil and gasoline prices surging worldwide. Gasoline prices in the U.S. stood at $4.15 on average per gallon on Friday, marking a leap of $1.17 since the start of the war, AAA data showed.
The BLS collected price data over the entire month of March. The inflation report, in turn, reflected prices for 31 of the first 32 days of war, excluding the outbreak of hostilities on Feb. 28. The ceasefire announced on Tuesday came after 40 days of fighting.
As part of a two-week U.S.-Iran ceasefire announced on Tuesday, Iran says it will allow tankers passage through the Strait of Hormuz as long as they coordinate with the nation’s military.
The resumption of tanker traffic remains uncertain, however. Tanker traffic was suspended on Wednesday after Israeli attacks on Lebanon, Iran’s semi-official Fars News Agency reported.
Crude prices fell after the ceasefire announcement but remained highly elevated. U.S. oil prices topped $98 a barrel as of Thursday, standing nearly 50% higher than their pre-war level.
A surge in consumer prices could pose difficulty for the Fed as it weathers a slowdown of economic performance over recent months.
If the Fed opts to lower borrowing costs, it could spur growth but risk higher inflation. On the other hand, the choice to raise interest rates may slow price increases but raises the likelihood of a cooldown in economic performance.
Last month, Federal Reserve Chairman Jerome Powell said that despite rising energy prices and the potential impact on inflation, he doesn’t think the central bank needs to raise interest rates.
Powell noted that central bankers often look past shocks — such as sudden oil-price increases — since the upward pressure on consumer prices usually proves temporary.
“We feel like our policy is in a good place for us to wait and see how that turns out,” Powell said.
The benchmark interest rate stands at a level between 3.5% and 3.75%. That figure marks a significant drop from a recent peak attained in 2023, but borrowing costs remain well above a 0% rate established at the outset of the COVID-19 pandemic.
The Fed will announce its next rate decision on April 29. Investors overwhelmingly expect the Fed to leave rates unchanged, according to the CME FedWatch Tool, a measure of market sentiment.
The tool pegs a roughly 70% chance that the Fed will maintain interest rates at current levels for the remainder of the year.
A sign displays the prices of unleaded gasoline and diesel fuel at a Chevron gas station in Los Angeles on Monday, May 4, 2026. (Kyle Grillot/Bloomberg via Getty Images)
(LOS ANGELES) — A Chevron gas station in Los Angeles elicited headlines in recent weeks for charging an eye-popping $8.71 a gallon, becoming an emblem for the spike in fuel costs set off by the Iran war.
Sky-high gas prices nationwide owe primarily to a historic oil shock that followed Iran’s effective closure of the Strait of Hormuz. But a lesser-known contributor helps account for just how high prices have gotten, at least at some name-brand stations selling fuel from the likes of Chevron, Shell and ExxonMobil.
Branded stations, which make up almost half of gas stations nationwide, charge about 6 cents more per gallon on average than their unbranded counterparts, according to data from the Oil Price Information Service (OPIS), a Dow Jones company, for the week ending on May 2. That price gap marks little change from where it stood before the war, OPIS data showed.
In at least one state, the price disparity runs significantly higher. Gas at a Chevron station in California costs an average of 48 cents more per gallon than the price at an unbranded station, the California Energy Commission (CEC) found in 2024. After Chevron, the most expensive average gas prices in California were found at Shell, 76 and Arco-branded stations, the CEC said.
Some analysts said the higher price of branded gas is due to additional costs, such as proprietary additives in the fuel, as well as a producer’s marketing budget and the payment forked over by stations for guaranteed access to its gas – costs that are passed on to consumers.
Other analysts and a California state watchdog, however, have said that the price disparity may stem from the market dominance of a handful of companies, allowing them to drive up the retail price.
The scrutiny comes as some large oil companies like British Petroleum, Valero and Marathon Petroleum report soaring profits amid the Iran war, though Chevron and Exxon saw profits decline due in part to one-time paper losses stemming from financial hedges meant to protect them against a possible price drop.
The price of an average gallon of gas currently stands at $4.52, an increase of $1.54 per gallon since the war began on Feb. 28, AAA data showed. That amounts to a nearly 52% jump in about two-and-a-half months.
Patrick Penfield, a professor of supply chain practice at Syracuse University, said the recent surge in prices could prompt a reexamination of the costs baked into the price at the pump, including the added charge for branded gas.
“When you see such big price increases for gasoline, everything should be looked at,” Penfield said.
Chevron did not directly respond to an ABC News request for comment. However, Jim Stanley, director of media relations at the Western States Petroleum Association, a industry trade group, contacted ABC News at Chevron’s request.
Drivers choose branded gas stations as a matter of customer preference centered on issues like lighting, bathroom cleanliness or location, Stanley said.
“Any branded product – whether it’s medication or groceries or clothing – is going to generally cost more than a generic alternative,” he added.
Stanley further said roughly 95% of branded gas stations operate as franchises, meaning they enter into agreements with big-name companies but retain self-ownership.
“Branded gas stations can have these brand standards that they hold their franchisees to: a higher standard than an independently owned store,” Stanley added.
Kelly Davila, a spokesperson for Exxon, said the company doesn’t “own or operate our retail stations.”
Shell declined to respond to ABC News’ request for comment.
Phillips 66, the parent company of 76, did not respond to ABC News’ request for comment. Neither did Marathon Petroleum, the parent company of Arco.
Branded gas stations account for about 45% of stations nationwide, selling gas under the name of a major fuel company, OPIS data shows. Each of the brands touts a unique blend of additives that it says improves the gasoline and eases its effect on car engines. The extra ingredients go beyond the minimum standards mandated by federal and some state regulators, Denton Cinquegrana, chief oil analyst at Dow Jones Energy, told ABC News.
“At the end of the day, all gasoline has to meet a federal standard,” Cinquegrana said. “The branded gasoline goes above and beyond that minimum requirement.”
Higher prices charged by name-brand stations – a dynamic that stretches back decades – can be traced in part to spending on the development and production of the additives, Cinquegrana added: “They’re trying to recoup some of that investment.”
Some analysts, however, said it remains unclear whether the added ingredients deliver a meaningfully improved product.
“Regardless of each company’s claim, there is not sound evidence supporting the fact that additives do indeed improve the quality of gasoline, at least to the extent that the consumers perceive it to,” a study issued by the non-profit RAND corporation found in 2010.
The California Division of Petroleum Market Oversight (DPMO), a state watchdog agency, last year said it was “unable to independently verify claims that branded gasoline is superior to unbranded gasoline.”
When asked about studies disputing the value of additives, Stanley, of the Western States Petroleum Association, declined to comment.
The higher price of branded gas also owes to marketing budgets borne by the big-name companies as well as elevated costs paid by retailers as part of agreements with the brands that guarantee them priority access in the event of a supply shortage, the U.S. Government Accountability Office said in a study of the issue published in 2005.
“Gas stations pay more for a contract for branded gasoline because they have a guarantee of supply. And they have a major global brand backing them up,” Cinquegrana said.
Some analysts and a California watchdog disputed those explanations. Rather, they said, the higher prices may reflect market power enjoyed by the large firms, giving them leeway to raise prices without fear of competition.
“My own reading of the data is that the branded companies are able to take advantage of a lack of a competitive market and are acting almost like an oligopoly,” Paasha Mahdavi, a professor of energy governance and political economy at the University of California, Santa Barbara, told ABC News, using a term that describes an industry dominated by a small number of companies.
Mahdavi focused on the relatively large price gap in California between branded and unbranded gas, which has widened in recent years.
In 2019, branded gas from companies like ExxonMobil, Arco, Valero and Chevron cost an average of 20 cents more per gallon in California; within five years, that price disparity had climbed to 31 cents, according to a DPMO study issued last year. Over that same period, the profitability of oil refiners in California has increased, DPMO said.
The rise in refinery profitability may be traced to the “exercise of market power by gasoline suppliers,” DPMO added, saying 90% of in-state refining capacity is controlled by four companies. As a result, elevated wholesale prices could be passed along the supply chain, DPMO said.
The largest companies appear to have “pretty strong control of not only upstream assets like oil and gas, but also control of the gas stations that are preferred by consumers based on location,” Mahdavi said. “They’re able to charge a higher premium.”
Valero did not respond to ABC News’ request for comment.
Stanley, of the Western States Petroleum Association, said he is unsure why California features a larger gap in price between branded and unbranded gas than other states. One contributor, he said, could be the relatively low density of gas stations in the state.
“Competition brings down costs. When a retailer doesn’t see that same level of competition, you can see that reflected in higher prices.”
Stanley faulted environmental regulations in California for high overall gas prices.
“Branded or unbranded, gas in California is the most expensive in the country. That’s because of supply constraints that have been created by state policies.”
Mahdavi further said that the locations of branded gas stations may carry additional costs due to higher rents, accounting for some of the price gap.
The rise in prices during the Iran war offers an opportunity to revisit the factors that contribute to the price at the pump, according to Mahdavi.
“We can shine more light on what is driving these higher prices,” he said.
U.S. President Donald Trump speaks with members of the media onboard Air Force One on March 29, 2026. (Nathan Howard/Getty Images)
(NEW YORK) — The Dow Jones Industrial Average soared more than 950 points on Tuesday after President Donald Trump appeared to suggest the U.S. may end the Iran war without reopening the Strait of Hormuz.
In a post on social media, Trump indicated that the task of reopening the strait may fall to other countries, urging them to “go to the Strait, and just TAKE IT.”
The Dow jumped 970 points, or 2.1%, by early afternoon, while the S&P 500 climbed 2.4%. The tech-heavy Nasdaq increased 3.4%.
Since the U.S.-Israeli war with Iran began on Feb. 28, Trump has voiced mixed messages about the expected duration of the war. On several occasions, markets have climbed after traders interpreted comments from Trump as a potential off-ramp from the Middle East conflict.
The war prompted Iranian closure of the strait, a maritime trading route that facilitates the transport of about one-fifth of the global oil supply. A potential U.S. exit from the war without ensuring that the strait is open could leave uncertain the path to a resumption of normal tanker traffic and a resulting remedy for the current global oil shortage.
Global oil prices surged more than 5% on Tuesday, exceeding $118 a barrel, just shy of its highest price since 2022.
Gas prices in the United States topped $4 per gallon on average Tuesday, underscoring the link between rising oil prices and strained consumers.
This is a developing story. Please check back for updates.
Shoppers visit the Tajrish Bazaar, one of Tehranâs main shopping areas. (Fatemeh Bahrami/Anadolu via Getty Images)
(NEW YORK) — A threat of U.S. attacks on power plants in Iran continues to loom over the Middle East conflict, even after Trump pushed back a self-imposed deadline for the second time.
In a post on social media on Thursday, Trump said he was “pausing the period of Energy Plant destruction” until April 6.
In the event of such an attack, Iran has said it would carry out tit-for-tat strikes against energy infrastructure in neighboring countries, according to Iran’s Fars News Agency state media.
The threatened escalation risks a humanitarian crisis for tens of millions of people in the region, potentially restricting their access to basic essentials such as electricity, food, water and health care, some analysts told ABC News.
Distress could spread to countries beyond the Gulf if dire conditions prompt residents to flee across borders and infrastructure damage worsens a global oil shock, analysts said.
“This will be bad for everybody,” Mushfiq Mobarak, a professor of economics at Yale University, told ABC News. “The most damaging effects — the largest welfare costs — will be on Iranian civilians.”
On March 21, Trump vowed to “obliterate” power plants in Iran within 48 hours unless the country eases its blockade of the Strait of Hormuz. Before the deadline arrived on Monday night in Washington, D.C., Trump posted on social media that he was postponing the ultimatum for five days, claiming “productive conversations” had been held between the U.S. and Iran.
On Thursday — one day before the new deadline was set to arrive — Trump said he would postpone the deadline for an additional 10 days.
Negotiations between the U.S. and Iran are “ongoing,” Trump claimed. Iranian officials have denied that the country is in talks with the U.S.
Meanwhile, Iran has pledged to retaliate against civilian infrastructure in nearby countries in response to an attack on its energy sites.
“Immediately after the power plants and infrastructure in our country are targeted, the critical infrastructure, energy infrastructure, and oil facilities throughout the region will be considered legitimate targets,” Iranian parliament speaker Mohammad Bagher Qalibaf said in a post on X on Sunday.
Natural gas supplies roughly 79% of electricity used in Iran, according to the International Energy Administration, a global energy policy group based in Paris, France.
The majority of the nation’s natural gas is supplied by South Pars, the largest natural gas field in the world. An Israeli attack on South Pars last week threatened severe impact in Iran and neighboring Gulf states, analysts previously told ABC News.
Potential U.S. attacks on energy infrastructure could cut off electricity access for many of the 92 million people in Iran, while at the same time discontinuing power for critical institutions like hospitals, Mobarak said.
“If hospitals lose power, that’s very dangerous,” Mobarak said.
The health care impact would come as some hospitals in the region face perilous conditions, according to the World Health Organization (WHO). Health care facilities faced a total of 13 attacks as of March 5, the WHO said, voicing concern about “health systems and lives at risk in the region.”
Attacks on civilian infrastructure in Iran could also worsen food shortages and price increases, Michael Werz, a senior fellow at the Council on Foreign Relations, told ABC News. Annual food inflation in Iran stood at 72% in December, before the war began, The Wall Street Journal reported.
Any further deterioration of food access, Werz said, could have a “massive impact.”
Potential Iranian retaliation against civilian sites threatens desperate conditions for millions of people in nearby countries Oman, Qatar, Kuwait, Saudi Arabia, the United Arab Emirates (UAE), Iraq and Israel, some analysts said.
Those countries depend in large part on water desalination plants for drinking water due to arid conditions in the region, making those facilities a major potential vulnerability, Ginger Matchett, assistant director with the GeoStrategy Initiative at the Atlantic Council’s Scowcroft Center for Strategy and Security, said in a blog post.
Desalinated drinking water accounts for at least 90% of the supply in Kuwait, Bahrain and Qatar, while Israel and Oman each depend on such plants for 80% of their drinking water, Matchett said.
“If Iran successfully destroyed the Gulf’s desalination infrastructure, then the consequences could be devastating,” Matchett added.
In early March, desalination plants in Iran and Bahrain were targeted in the fighting, and missile-related damage has also been reported at sites in Kuwait and the UAE.
Potential retaliatory attacks on oil and gas sites in the region also threaten to deepen and prolong a global oil crisis, driving up fuel costs and raising prices for essential goods worldwide, some analysts said.
Global oil prices skyrocketed in recent weeks after the war prompted closure of the Strait of Hormuz, a critical waterway for global oil and natural gas delivery. Consumers have held out hope for a reopening of the strait and a relatively speedy recovery, but facility repairs could stretch on for months and choke off fuel supply in the meantime.
Qatari authorities said last week that Iranian ballistic missile attacks caused fires and “extensive damage” at the Ras Laffan terminal, which carries about one-fifth of the global supply of liquid natural gas. An Iranian missile attack struck oil refineries last week in Haifa, Israel, where fire brigades extinguished a fire that broke out at the site, Israel Fire and Rescue said.
The Philippines has declared a national energy emergency in response to the U.S.-Israeli war with Iran, while South Korea has called on residents to ride bicycles for short trips and reduce the length of showers. Thailand and Vietnam have also asked citizens to take steps to curtail energy use.
Roughly 80% of the oil that typically passes through the strait is bound for Asian markets, according to the IEA. Still, the oil shock will raise gas prices worldwide, since energy is sold on a global market, Mobarak said.
“This will have effects for gas consumers across the world,” he added.
