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A major barometer for how many Americans feel about the economy is fuel prices. Rising prices at the pump can squeeze an already tight budget. Thankfully, GasBuddy reports that gas prices have been relatively stable in recent months.
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Rising conflicts in the Middle East may threaten that stability. Recent actions by Israel and Iran could directly impact what Americans pay at the pump.
Here are four key signs that gas prices will spike due to shortages by oil-producing countries in the Middle East.
Americans may have heard reports of Iran considering closing access to the Strait of Hormuz. The Strait provides the only route from the Persian Gulf to the open ocean. Iran controls the northern side of the Strait. Closing access to it could have a significant impact on the price of oil.
The New York Times indicated why this would be important, noting, “A quarter of the world’s oil and 20 percent of the world’s liquefied natural gas passes through the Strait of Hormuz, so mining the choke point would cause oil and gas prices to soar.” While most of the oil going through the Strait goes to Asia, America would feel the impact of a move with increased energy costs.
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Any time military action occurs, it can lead to a potential increase in cost, particularly when commodities are impacted. Continued hostilities in the Middle East will only exacerbate the risk of increased oil prices.
“With Israel and Iran trading attacks, oil prices have surged to multi-month highs — setting the stage for additional price hikes at gas pumps across the country. As long as tensions in the Middle East continue to escalate, the risk of further impacts on oil prices remains high,” said Patrick De Haan, head of petroleum analysis at GasBuddy, in an interview with Fortune.
De Haan noted Americans can expect prices to increase by $0.10 to $0.20 per gallon in the near term, if not more. “Motorists should prepare for what will likely be modest price increases, for now, but the situation has the potential to worsen at any moment,” said De Haan.
Military action typically poses a risk to the price of goods, but regime change can be even more detrimental. Iran’s Supreme Leader, Ayatollah Ali Khamenei, had not been publicly heard from for nearly a week after the United States bombed sites in Iran.
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