The ongoing conflict in Iran has significantly impacted global fuel prices, with oil prices increasing from $65 a barrel before the conflict began in February 2026 to over $100 a barrel in mid-September. The Strait of Hormuz, a primary route for oil leaving the Middle East, has seen traffic levels drop below 15% of pre-war levels. Analysts had initially feared that prices could reach $150 or $200 a barrel, but a combination of safety measures and global responses has mitigated the impact so far. Researchers studying the relationship between energy and national security have been monitoring these dynamics closely.
Despite the challenges, some oil has continued to flow out of the Persian Gulf. Saudi Arabia increased output via its East-West pipeline, which can carry up to 7 million barrels per day, although typically only 4-5 million barrels per day are exported. However, attacks on the pipeline in mid-September, attributed to Iran-backed militias, forced a temporary halt in oil shipments. The pipeline has restarted operations at low volumes, but it may take six to eight weeks to regain full capacity. This short-term disruption has tightened already constrained oil markets.
The conflict has also affected Russia, where Ukrainian drone attacks have damaged refineries, reducing Russian production of diesel fuel. In response, Russia has banned exports of diesel, removing another 3% of the global daily supply. This has significant implications for the global economy, as diesel is a critical fuel for trucking and shipping. When diesel costs rise, it leads to inflation in the cost of goods across the global economy.
The impact of these disruptions is being felt worldwide. In the United States, 47 states experienced record-high diesel prices on September 22, with the national average reaching $6.52 per gallon. The high prices prompted President Donald Trump to threaten to ban diesel exports, a move that analysts suggest would exacerbate global supply shortages and drive prices upward. Additionally, motor oil prices have quadrupled, and supply shortages are starting to take hold.
The effects of the conflict and supply chain disruptions are being felt particularly acutely outside the United States. South and Southeast Asian countries, which were more reliant on imports from the Persian Gulf, were hit hard soon after the war broke out. Some countries have had to ration fuel, while others have enacted emergency measures like shortening the work or school week to reduce fuel use. Europe is also starting to feel the pinch, with 15% of French service stations reportedly running out of diesel or gas on September 20.
The international community has taken steps to curb oil demand and boost supply, including releasing over 400 million barrels of oil from strategic reserves. However, these stockpiles are now substantially depleted, and it is unclear how much additional oil countries will be willing or able to release as the conflict continues. The United States, for example, has released 130 million barrels from its Strategic Petroleum Reserve, leaving its reserves at a 40-year low.
China has played a significant role in containing global oil prices to date, releasing official reserves and reducing crude oil imports by nearly 50% between February and June 2026. The country's increased electrification of its transport sector, with over 60% of new passenger car sales being electric vehicles or plug-in hybrids, has also helped reduce oil consumption. However, China's oil demand is now starting to creep up again, and increased demand, coupled with a tighter oil market, may result in additional price hikes over the next few weeks.
Key points
- Global fuel prices are expected to rise further due to the ongoing conflict in Iran and supply chain disruptions.
- The conflict has led to significant increases in oil prices, with prices rising from $65 a barrel to over $100 a barrel in mid-September.
- China has played a key role in containing global oil prices, but its oil demand is now starting to increase again.
