JUNEAU, Alaska (KTUU) – The widening Middle East conflict sent oil prices to $75 a barrel Tuesday and Alaskans are already feeling the impact at the pump and in the capital.
The statewide average for a gallon of regular gasoline reached $3.64 on Monday, up from $3.58 a week ago and $3.44 a month ago, according to AAA.
In Anchorage, the average hit $3.63, up from $3.54 a week ago.
West Texas Intermediate crude oil prices jumped from $65 per barrel to nearly $75 by market close Tuesday, representing a roughly 15% increase as traders reacted to the Feb. 28 military campaign against Iranian targets, according to Brett Watson, an associate professor of applied and natural resource economics at the University of Alaska Anchorage.
The conflict ground shipping to a near halt in the Strait of Hormuz, through which a fifth of global oil supply flows, according to Reuters.
Alaska, which produces about 5% of U.S. oil, stands to benefit from higher energy prices in the short term. Alaska crude typically trades about $5 above the WTI benchmark, Watson said.
However, commodity analysts project the price spike will be transient, with expectations that prices will return to previous levels of $60 to $65 per barrel within six to 12 months as the conflict stabilizes, he said.
“The present scale of the conflict is causing a lot of tension in global energy markets,” Watson said. “But the medium to longer term outlook looks like the situation that existed prior to the U.S. and Israel’s actions in Iran.”
State budget impact
Higher oil prices generally mean more money for the legislature, but majority lawmakers are hesitant to plan a budget around an uncertain oil future.
“[There’s] a lot of excitement in the building,” Senate President Gary Stevens, R-Kodiak, said in a Tuesday press conference. “We’re concerned about what’s going on in the Middle East and the death [and destruction] that have occurred, but one of the benefits is that there should be some higher oil prices.”
In Juneau, an extended conflict or disruptions in Middle Eastern oil production could be transformational for a state pinching pennies.
“For every dollar that oil prices go up, and this is very rough … it’s roughly $30 million over the course of a year,” Sen. Bill Wielechowski, D-Anchorage, said. “If the oil is based on $64 [a barrel], oil goes up to $65 for a year … you’re probably going to raise $30 million and that’s about $82,000 a day.”
For those in the minority, that could fill the $1.5 billion hole in the governor’s proposed budget and deliver a full statutory permanent fund dividend.
“The recent spike in oil prices underscores the need for a full Permanent Fund Dividend,” Eagle River Republican Rep. Jamie Allard said on Facebook Monday, a post several lawmakers have liked, including Senate Minority Leader Mike Cronk, R-Tok/Northway.
That call wasn’t unanimous amongst the minority. House Minority Leader DeLena Johnson, R-Palmer, told Alaska’s News Source delivering a full PFD with the rising oil prices “would still be a significant challenge.”
“The recent Middle East conflict certainly changes the outlook on this year’s budget deficit,” she said in a statement Tuesday. “If this goes on for a number of months, it is going to have a significant effect. I would hate to increase next year’s budget based on a temporary run up of oil prices.”
While majority lawmakers didn’t hit on the PFD Tuesday, expectations for what the state would end up seeing was tempered.
For Alaska lawmakers planning the state’s fiscal year 2026-2027 budget, the price increases are unlikely to significantly impact revenue projections with prices expected to have returned to previous levels by the time that budget takes effect, Watson said.
However, if the conflict escalates or energy production infrastructure sustains more damage, higher prices could persist and affect Alaska’s revenue picture, he said.
“I wouldn’t say [my viewpoint] is negative,” Sitka Republican Sen. Bert Stedman and Senate Finance Co-Chair said after Stevens teasingly said he was being pessimistic.
“I would say it’s cautious because we have another quarter left in this fiscal year.
“We don’t want to get into a position of overspending the budget,” Stedman said.
The price spike spoke to a more fundamental issue about Alaska’s economy: should the state lean on a volatile revenue base?
“We can’t be looking at one-time money for ongoing expenditures,” Bethel Democrat Sen. Lyman Hoffman said. “I think the bigger question is what are we going to do as a state to balance our checkbook on the long term and address the needs that our citizens expect of us?”
Sen. Cathy Giessel, R-Anchorage, said Alaska has the tools to correct deficits and not be “tied to something that we cannot control, which is international oil prices and, sadly, counting on wars — where people are being killed — to support our state.”
The conflict marks the second time in less than a year that U.S.-Israeli military action in Iran has disrupted energy markets. A similar intervention in June 2025 caused comparable price increases before markets stabilized, Watson said.
President Donald Trump announced Tuesday that the United States might provide protection to oil tankers moving through the Strait of Hormuz, a critical chokepoint for global energy shipments.
“That was a signal to the market that the administration might be taking more drastic action to try to curtail some of these impacts that consumers might be facing when they go to fill up their tanks,” Watson said.
Liquefied Natural Gas (LNG) Impacts
The Iran conflict’s impact on natural gas markets has been more severe.
Iranian airstrikes damaged natural gas infrastructure in Qatar, which produces about 20% of global liquefied natural gas (LNG) exports. Pacific LNG prices surged 70 to 80% in the last day, Watson said.
Qatar has now halted all LNG production this week after Iranian drone attacks on the Ras Laffan industrial complex, which is home to the country’s gas processing trains. State-owned QatarEnergy, whose clients are 82% Asian, was set to declare force majeure on LNG shipments, according to Reuters.
The supply disruption sent natural gas prices soaring globally. Europe’s benchmark natural gas price, the Dutch Title Transfer Facility, or TTF, surged 46%, according to Reuters.
The damage to Qatari infrastructure is expected to have more persistent effects than the oil price increases because the facilities will require time to repair even after the conflict ends.
“The resolution of this conflict won’t restore that infrastructure to its previous working condition,” Watson said.
The conflict has also spread to Saudi Arabia. Drones struck Saudi Aramco’s Ras Tanura refinery Sunday, the kingdom’s largest domestic oil refinery that processes 550,000 barrels per day, prompting a precautionary shutdown, according to Reuters.
“The attack on Saudi Arabia’s Ras Tanura refinery marks a significant escalation, with Gulf energy infrastructure now squarely in Iran’s sights,” said Torbjorn Soltvedt, principal Middle East analyst at risk intelligence firm Verisk Maplecroft, in a statement to Reuters.
How will this impact Alaska’s LNG project?
Watson said the situation could renew attention to Alaska’s proposed gas pipeline project, which proponents have long argued would provide Asian consumers with a diversified natural gas supply less vulnerable to Middle East disruptions.
“This conflict kind of underscores the case that proponents of the gas line project have been making for that more diversified natural gas supply,” Watson said.
Trump said Monday the escalating campaign against Iran would likely take several weeks.
Tehran and its allies retaliated across the region, striking Israel and a variety of targets inside Gulf states, including energy facilities in Qatar and the American Embassy in Saudi Arabia, according to the Associated Press.
The extent of damage to Middle East energy infrastructure during that period will be a key factor in determining how long elevated prices persist, Watson said.
The last comparable price swing occurred during the June 2025 U.S.-Israeli intervention in Iran, though Watson said the current conflict appears more significant in scale.
“We’re likely to see markets continuing to react to that scale of conflict and the uncertainty that it creates in global trading routes,” Watson said.
Editor’s note: This story incorporates Reuters reporting, from March 2, 2026.
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