Why Oil Prices Are Rising and What It Means for Gas Prices

Oil prices have surged in recent weeks following U.S. strikes on Iran and Iran’s subsequent closure of the Strait of Hormuz, one of the world’s most crucial energy chokepoints. In March, crude oil climbed above $100 per barrel for the first time since 2022, driving a noticeable jump in gas prices for many Americans.

Oil market volatility doesn’t always draw the same attention as stock market swings, but higher prices at the pump tend to change that. To put recent moves into context, it helps to understand how the oil market works and how those dynamics flow through to gas prices.

What Is the Oil Market?

There are two primary markets for crude oil: the physical market and the futures market.

In the physical market, producers like Exxon Mobil pump oil from the ground and sell it to refiners, who turn it into gasoline, diesel, and jet fuel, often using traders and shipping companies as middlemen to move crude around the world. Prices are set through private deals that aren’t fully transparent, so agencies like S&P Global Platts and Argus publish daily spot price assessments based on observed trades and trader input.

By contrast, the futures market is an electronic financial marketplace where producers, refiners, airlines, and financial institutions trade standardized contracts to lock in prices for future deliveries and manage risk. When you see headlines that “Brent crude topped $100 per barrel,” they’re almost always referring to the front‑month Brent futures contract—the most actively traded benchmark for oil delivered in the nearest month.

These futures contracts trade mainly on CME Group’s New York Mercantile Exchange and the Intercontinental Exchange in London, and prices are visible in real time across financial data platforms. While short‑term speculative activity can amplify price swings, futures prices generally anchor to underlying physical supply and demand over time.

Global Oil Supply and U.S. Energy Independence

The 13 nations that comprise the Organization of the Petroleum Exporting Countries (OPEC) collectively control the majority of the world’s proven oil reserves and remain central to setting global supply. However, non‑OPEC producers—especially the United States, Brazil, Canada, and Guyana—have become increasingly important sources of new supply.

The United States is the world’s largest crude oil producer, with output reaching a record annual average of about 13.2 million barrels per day in 2024. Thanks to a rising domestic cushion and only a modest increase in demand, imports accounted for just 17% of total U.S. energy supply in 2024, the lowest share in nearly 40 years. At the same time, the U.S. has become a major exporter, exporting roughly 30% of the energy it produced in 2024, including crude oil, refined products, and natural gas.

Despite this shift, the U.S. still imports and exports crude because not all oil is the same. Many Gulf Coast refineries are designed for heavier, sour crudes, while much of today’s U.S. output is lighter, sweeter shale oil. As a result, it often makes economic sense to export light barrels and import heavier ones that better match domestic refining capacity.

This means that even as the U.S. approaches “energy independence” on paper, American consumers remain exposed to global crude benchmarks like Brent and the geopolitical events that move them.

How Geopolitics Affect Oil and Gas Prices: The Strait of Hormuz Closure

Recent events in the Middle East are a clear reminder that, even with stronger U.S. production, global shocks can still move the price you pay at the pump.

In early March 2026, Iran’s closure of the Strait of Hormuz—one of the world’s most critical energy chokepoints—triggered what many described as the largest single oil‑supply disruption in modern history. Roughly 20% of global oil flows through this narrow waterway, so the sudden halt stranded shipments, forced Gulf producers to curb exports, and immediately tightened global supply.

Oil prices reacted quickly. Brent crude, the global benchmark, surpassed $100 per barrel on March 8, 2026, and later peaked at around $120 per barrel as markets began to price in the risk of a prolonged shutdown. The last time oil prices reached this level was in 2022, when prices briefly hit nearly $120 per barrel after Russia’s invasion of Ukraine, one of the sharpest energy shocks of the past decade.

Meanwhile, gasoline prices have also soared as refiners and distributors adjust to higher crude costs and disrupted trade routes, with U.S. consumers seeing noticeable increases at the pump. As of March 31, 2026, the national average price for a gallon of regular gas exceeded $4, a more than $1 increase from one month earlier, according to AAA.

The Relationship Between Oil and Gas Prices

The relationship between oil and gas prices isn’t always straightforward since retailers set their gas prices based on replacement cost, even during shocks like the Strait of Hormuz closure. This means there’s typically a lag between changes in oil prices and changes in gas prices.

When wholesale prices increase, for example, retailers will often take a hit to their margins first to remain competitive with other retailers nearby. Similarly, retailers may hold their gas prices steady despite a lower delivery cost to make up for the margin they lost during the price increase.

Additionally, there’s usually a drop in demand when gas prices spike as consumers top off their tanks in anticipation. This slowdown in demand affects when retailers schedule their next fuel delivery—another reason oil and gas prices don’t always move in lockstep. At the same time, lower prices may prompt drivers to fill their tanks, thereby increasing demand.

Lastly, consumer demand isn’t always consistent with oil price movement. For instance, people tend to drive more during the summer months, so gas demand often remains strong even when prices are above average.

Despite these nuances, gas prices have surged alongside oil prices in recent weeks because this shock is both large and sustained, and retailers know their next deliveries will be priced off much higher crude. The combination of disrupted supply through the Strait of Hormuz, the seasonal switch to more expensive summer gasoline, and stronger spring travel demand has pushed pump prices higher, almost in lockstep with Brent.

Where Do Oil and Gas Prices Go from Here?

Oil markets are reacting in real time to a supply shock, so the path forward depends on how quickly conditions stabilize. In the near term, prices are likely to remain elevated and volatile, especially while key shipping routes are disrupted.

From there, timing matters. If the Strait reopens and supply normalizes, prices could ease as production ramps up, inventories rebuild, and demand adjusts. If the disruption persists, higher-for-longer oil prices, continued inflation pressure, and a drag on global growth become more likely. Additional geopolitical risks, including developments in Venezuela, could further impact supply.

For investors and households, this kind of volatility can feel unsettling. Energy markets are cyclical and often influenced by factors outside your control, which can make it difficult to know how to respond. In most cases, staying focused on a well-thought-out long-term plan tends to be more effective than reacting to short-term price swings.

Staying focused on a well-thought-out long-term plan is more consistently effective than reacting to short-term price swings.

If recent volatility has raised questions or concerns, it would be worth revisiting your plan to instill confidence it will hold up across different scenarios. This informed confidence is our hallmark. Reach out to get started.