Gasoline Prices Surge Past $3.50 in the United States Amid Rising Global Tensions

The U.S. average price for regular gasoline rose to $3.50 per gallon in early March 2026, ‘the highest level since 2024,’ according to the U.S. Energy Information Administration (EIA).

This surge is linked to a sharp increase in global crude oil prices, driven by the ongoing U.S.-Iran conflict and its impact on key oil supply routes, including the Strait of Hormuz. The situation has raised concerns about stagflation, a scenario where inflation rises while economic growth stagnates, among economists and market analysts.

The conflict between the United States and Iran has significantly disrupted global oil markets. Iranian forces closed the Strait of Hormuz, a critical pathway for global oil and liquefied natural gas (LNG) transportation, halting approximately 20% of the world’s oil shipments. Attacks on oil infrastructure in the Gulf further intensified the crisis, leading to a sharp rise in crude oil prices. Brent crude, the international benchmark, exceeded $100 per barrel in early March, peaking at $119.50 per barrel in a single day, as reported by ‘the Guardian’.

U.S. West Texas Intermediate (WTI) crude also reached record highs, nearing $120 per barrel.

The conflict has also led to a decline in oil production in the Middle East. Countries such as Iraq, Kuwait, and Bahrain temporarily suspended production due to limited storage capacity and the risk of further attacks. These factors have worsened fears of a prolonged supply shortage, which could sustain high oil prices and contribute to economic instability.

The surge in crude oil prices has directly influenced U.S. gas prices. According to AAA, the national average for regular gasoline reached $3.45 per gallon in early March, a 50-cent increase from the previous week. Prices have risen sharply in states reliant on Middle Eastern oil imports, such as California and Hawaii, where prices surpassed $5.00 per gallon.

The EIA notes that about half of U.S. gasoline costs are linked to global crude oil prices, making the market highly sensitive to international supply disruptions.

The economic consequences of the price spike are extensive. Higher fuel costs are reducing household budgets and increasing business expenses, potentially leading to higher prices for goods and services. Royal Bank of Canada economists project the U.S. inflation rate could rise to 3.7% if oil prices remain above $100 per barrel.

Similar concerns have been raised in the UK and the eurozone, where energy prices have also surged. In Australia, inflation is expected to approach 5%, with petrol prices potentially increasing by a dollar per litre.

The oil price surge has caused significant volatility in global financial markets. Asian stock markets, particularly in Japan and South Korea, experienced sharp declines, with the Nikkei and Kospi indices dropping over 6% and 7% respectively.

European and U.S. markets are anticipated to follow suit as investors worry about the economic impact of sustained high oil prices.

In response, G7 nations have discussed the possibility of releasing oil from strategic reserves to stabilize prices. The International Energy Agency (IEA) has urged countries to tap into these reserves, though analysts note that available stockpiles may not fully offset the supply gap caused by the conflict. OPEC+ is also considering production adjustments, but the effectiveness of such measures remains uncertain.

Economists warn that the combination of high oil prices and weak economic growth could lead to stagflation. The International Monetary Fund (IMF) estimates that a 10% increase in energy prices could reduce global economic growth by 0.3 percentage points, pushing it to 3% from its current 3.2%. In the U.S., oil prices of $125 per barrel could cut GDP by 0.8% even as inflation surpasses 4%, according to RSM.

The situation mirrors the 1970s oil crises, when Middle East conflicts led to surging prices and economic stagnation. David Bassanese, chief economist at BetaShares, warns that if oil prices remain above $100 per barrel and the conflict persists, the world could face a stagflationary moment in the first half of 2026. Central banks may struggle to respond, as high inflation could limit their ability to cut interest rates.