Oil price swings as Iran war intensifies push Brent above USD 110 and lift petrol costs

As the war in Iran continues, oil price swings have pushed Brent crude above USD 110 a barrel. Rising crude costs are lifting petrol, diesel and jet fuel prices, increasing transport and shipping expenses. That pressure can feed into inflation, affecting food and other goods and potentially squeezing household spending over time.

Oil and fuel prices were swinging as the war in Iran continued to unsettle energy markets. Brent crude, a global benchmark, traded above USD 110 a barrel. Higher crude prices usually lifted petrol, diesel, and jet fuel costs. Many households faced quick pressure at the fuel pump. Economists also warned of broader price rises across goods and services.

Because most items move long distances, transport fuel costs often shaped everyday prices. When diesel and petrol rose, shipping charges tended to increase too. Experts said that could feed into inflation. Over time, higher prices could curb spending on non-essential purchases. Some analysts said the impact could spread beyond drivers to most consumers.

Gas prices and crude oil costs

Across the US, pump prices were close to their highest levels since 2022. Drivers paid an average USD 3.88 per gallon of regular petrol on Thursday. That compared with USD 2.98 before the war started. Prices were up about 30 per cent since the US and Israel attacked Iran. Costs varied widely between states.

California drivers paid nearly USD 5.62 a gallon on Thursday. Several refineries in the state have closed in recent years. California depended on imported petrol and other fuels from Asia. Louisiana averaged USD 3.52 because of local output and refining. Oklahoma recorded the lowest average at USD 3.24 per gallon.

Patrick Penfield, a supply chain professor at Syracuse University, linked crude costs to fuel prices. Penfield said USD 4 per gallon often changed consumer behaviour. "When gas prices hit USD 4, thats usually the tipping point for consumers,\" Penfield said. \"Thats usually when people start to pull back,\" Penfield said.

\"They may not drive as much, or they may not go out. they have decisions to make so either you can spend it on going out or you spend it buying gas for your car,\" Penfield said. Penfield expected petrol to reach that level within one or two weeks. Analysts said Asia and Europe could feel stronger pressure due to reliance on Middle Eastern energy.

Diesel prices and shipping costs

Diesel, used widely by 18-wheeler trucks, also became more expensive. US diesel prices were nearly USD 5.10 a gallon on Thursday. That marked a 36 per cent rise since the war started. Patrick De Haan, a petroleum analyst at GasBuddy, discussed the wider hit to output and costs.

\"Higher gasoline and diesel prices are now costing the US economy half a billion dollars more every single day and rising versus three weeks ago,\" De Haan wrote on X Monday. \"A staggering rise and near record-setting.\" The shipping sector also faced disruption. The effective closure of the Strait of Hormuz created added delays and risk.

The Strait of Hormuz carried about a fifth of the world’s crude oil and liquefied natural gas. Penfield said fuel usually made up 50 to 60 per cent of shipping operating costs. That meant higher bunker fuel prices could quickly lift freight bills. Penfield said surcharges were becoming more common across routes and cargo types.

\"Prices have been going up per container, youre seeing more of the surcharges, war surcharges, fuel surchargers,\" Penfield said. \"So unfortunately, right now everything has just gone up again, anywhere from 10 per cent to 20 per cent, 30 per cent. So it just depends on where youre moving things.\"

Inflation and consumer spending pressure

US oil prices rose about 43 per cent from prewar levels. They reached about USD 96 a barrel on Thursday, from about USD 67 earlier. Economists said that could lift inflation in the short run. Gregory Daco, chief economist at EY-Parthenon, modelled how higher fuel bills could affect price growth during March.

Daco estimated monthly inflation could rise to as high as 1 per cent in March. That would be the biggest monthly increase in four years. Yearly inflation would approach 3% under that scenario. \"Thats a significant shock in and of itself,\" Daco said. Analysts said a longer period of high energy prices could deepen the effect.

Mark Mathews at the National Retail Federation said lower-income shoppers could be hit first. Mathews said US households spent about USD 2,500 a year on fuel. That equalled nearly USD 50 per week. If weekly costs rose by USD 10, budgets would tighten. Mathews said leisure and dining were likely areas for cuts.

\"How do they offset that?\" Mathews said. \"Going out to a movie theater or going to a theme park or going out to eat - all those areas would be... more likely see cuts.\" Francesco DAcunto of Georgetown University said expectations changed quickly. Households often reacted when necessities like petrol and groceries became costlier.

DAcunto said inflation worries could shift spending before other prices moved. DAcunto also pointed to uncertainty during geopolitical conflict. That mix could make households delay major decisions. DAcunto said some might postpone buying a car or house. The aim was to reduce risk when future costs looked unclear.

Natural gas prices and grocery bills

Home energy bills could rise as natural gas markets reacted to the conflict. Europe’s benchmark natural gas price increased about 71 per cent since the war began. The Intercontinental Exchange data showed the move. Higher natural gas costs could also raise prices of goods linked to gas-based feedstocks. These included plastic, rubber, and nitrogen fertiliser.

David Ortega of Michigan State University said US food prices might not jump immediately. Ortega said a one-month period of high oil prices mattered more. Ortega said farms faced higher costs for fuel and fertiliser. Ortega also said expensive oil could boost demand for vegetable oils used as fuel substitutes, including soybean and palm oils.

Ortega said farm expenses were only a small share of supermarket prices. Processing and transport were often larger cost drivers. \"Food gets to the grocery store on diesel, whether its on a truck or on a boat,\" Ortega said. Ortega said fresh foods could rise sooner than packaged items. Fresh goods required faster transport and careful handling.

Retail pricing decisions and policy warnings

Mathews said retailers might carry higher freight costs for a period. Mathews compared this approach to how some firms handled higher tariffs. Still, risks grew if fuel prices stayed high. In Europe, Italian Finance Minister Giancarlo Giorgetti cautioned against passing costs on quickly. Giorgetti referred to earlier inflation after Russia’s invasion of Ukraine.

\"We must act immediately to stop energy prices from spreading to all consumer goods, as happened in 2022,\" Giorgetti told a G7 meeting in Brussels on March 9, according to a statement from his office. Economists said consumers were watching fuel and grocery costs closely. As the war continued, energy prices remained a key driver of near-term inflation risks.

With inputs from PTI