From $67 to $120 and back: Iran war exposes fossil fuel price chaos

A tentative peace deal between the United States and Iran has raised hopes that the sharp spike in consumer prices seen over the past three months will quickly reverse. However, a range of economists and industry analysts warn that the relief will be slow and uneven, with lingering effects on gasoline, groceries, airfares, and even footwear expected to persist for weeks or months. The conflict, which erupted over control of the Strait of Hormuz—a chokepoint for roughly one-fifth of global oil supply—disrupted not only crude and refined fuel flows but also downstream supply chains for fertilizer, food, and manufactured goods. Even as U.S. benchmark crude prices fell from over $120 a barrel at the height of the war to around $80 on Monday following news of the tentative agreement, experts caution that the 'rockets and feathers' pattern of fuel pricing will keep pump prices elevated longer than many consumers expect. Refineries typically buy crude oil a month or more in advance, meaning the lower spot price won't translate into cheaper gasoline for weeks, and regions with insufficient refining capacity, such as the West Coast, will lag even further. Meanwhile, jet fuel costs remain baked into airline ticket pricing for the summer travel season, and food producers are still absorbing the higher fertilizer costs that resulted from reduced exports out of the Middle East. Fertilizer production is energy-intensive and heavily dependent on natural gas, which also saw price spikes linked to the conflict, further entrenching higher costs for agricultural commodities and grocery items. Brett House, an economist at Columbia Business School, emphasized that 'by almost any measure, not just the American consumer, but the world, is worse off' from the war, underscoring that no lasting economic benefit has been achieved. The disruption has exposed the fragility of just-in-time supply chains and the vulnerability of global trade to geopolitical flashpoints. Even as tankers begin to traverse the Strait again, it will take time to restock inventories, clear backlogs at ports, and renegotiate supplier contracts that were locked in at panic-level prices. Moreover, the psychological impact on business planning is likely to result in a risk premium embedded in pricing for months to come. For consumers, the practical takeaway is that while the worst price surges are likely past, a return to pre-war cost levels—crude at $67 per barrel and gasoline near spring 2026 lows—may not materialize until late 2026 at the earliest. The lagged effect on core inflation could also complicate monetary policy decisions, particularly if central banks had begun to envision rate cuts in response to a temporary shock. In sum, the Iran war's economic scar will outlast the guns, reinforcing the lesson that energy-driven inflation de-escalates far more slowly than it escalates.