Brent crude touched $126 a barrel overnight, the highest level since 2022, before pulling back to roughly $114 by Thursday morning. The price spike, the latest in a string of escalating moves, came as the Strait of Hormuz blockade entered its third month with no diplomatic off-ramp in sight. Iran continues to impede access to the strait while the United States blockades Iranian ports and seizes vessels accused of violating the restrictions. President Donald Trump is being briefed Thursday by CENTCOM Commander Admiral Brad Cooper on a fresh menu of military options. The conflict’s running cost has reached an estimated $25 billion. The most important sentence in this story has nothing to do with oil futures: roughly 20% of the world’s oil and gas supply still cannot get through.
That is a problem that compounds daily. Energy markets are not designed to absorb a chokepoint outage that stretches into a second month. Inventories in Asia are draining faster than refiners can rebalance. Tanker insurance rates are at war-zone levels. Spot LNG cargoes are being rerouted at premiums that would have looked surreal six weeks ago. And the consumer is starting to feel it.
What The Numbers Look Like At The Pump
The US national average for regular gasoline has climbed to roughly $4.30 a gallon, up 27 cents in the past week alone. California, the perennial high point on the national map, hit a fresh average of $6.01 a gallon Thursday, a 30% increase since the war began in late February. Refiners on the West Coast are running flat out, but the marginal barrel of crude is now meaningfully more expensive, and the maintenance cycle on California’s geographically isolated refining complex limits how quickly that pain can be smoothed out.
Diesel, jet fuel, and propane have all moved similarly. The trucking industry is absorbing higher fuel surcharges. Airlines are quietly hedging into the back half of the year at unfavorable prices. Petrochemicals, the part of the energy complex that matters for everything from packaging to fertilizer, are seeing their feedstock economics reset higher in real time. Consumers will see the second-order effects, gradually, in their grocery bills, their delivery charges, and their summer travel costs.
The Macro Risk That Powell Is Leaving Behind
The timing here is uncomfortable. The Federal Reserve held its benchmark policy rate in a range of 3.5% to 3.75% on Wednesday in what was almost certainly Jerome Powell’s last meeting as chair. Four FOMC members dissented, the largest split since 1992, with three regional presidents pushing back against an easing bias and one governor pushing for an immediate cut. Powell has now disclosed he will remain on the board as a governor, citing a Department of Justice investigation that he said left him “no choice.” The presumed incoming chair, Kevin Warsh, has been telegraphing a more orthodox monetary stance.
Into that already messy political and institutional moment, energy prices are now injecting an old-school cost-push inflation impulse. Headline CPI is going to be lifted by gasoline alone in the coming print. Core inflation expectations, which have so far stayed reasonably anchored, will be tested. Whoever is running policy in the second half of 2026 will be doing so with one eye on a labor market that has slowed and one on an energy shock the Fed cannot fix. That is the textbook definition of stagflation pressure, and it is the reason the bond market is suddenly very interested in long-end yields again.
The Stock Market Implications: Winners And Losers
Energy producers are the obvious near-term winners. ExxonMobil and Chevron, both of which have leaned into capital discipline since the last commodity cycle, are sitting on the cleanest balance sheets in the sector and are returning cash via dividends and buybacks at a pace that compounds with every dollar Brent stays above $100. US shale producers in the Permian are well below breakeven on most projects, and the rig count is starting to inch higher again. Oil services names like Halliburton and SLB benefit from any sustained spike in capex intent.
The losers are easier to spot than to count. Airlines and shipping companies are absorbing fuel pass-through with limited pricing power. Consumer discretionary names face a slowdown if gasoline prices stay elevated through the summer driving season. Auto manufacturers, particularly those carrying high inventory of trucks and SUVs, will see demand mix shift back toward smaller and electric vehicles. Cyclical industrials with global supply chains take an indirect hit through diesel and freight costs. Asia-exposed names with energy-intensive manufacturing are looking at margin compression that will not show up in earnings until next quarter.
And then there is the political economy of the 2026 midterms. Gasoline prices are the single most visible inflation signal in American politics. The White House knows this, the Fed knows this, and the energy markets know this. Every additional week the Strait of Hormuz stays closed raises the political cost of inaction.
The Diplomatic Story Beneath The Tape
Iran has publicly proposed reopening the strait under conditions that the United States has so far rejected, including limits on US naval transit and a partial lifting of sanctions on Iranian crude exports. Trump’s posture, communicated through both Defense Secretary Pete Hegseth and via direct social media, has been that Tehran must “just give up” before any negotiation begins in earnest. The US has formally requested international assistance to reopen the strait, including outreach to the navies of Japan, South Korea, India, and several Gulf partners. So far, the coalition is more rhetorical than operational.
The Pentagon is now considering more aggressive options, ranging from a permanent naval escort regime to direct strikes on Iranian missile infrastructure threatening shipping lanes. None of those options is small. All of them carry the risk of further escalation. The aircraft carrier most directly involved in the conflict is reportedly preparing to leave the Middle East theater later this spring, a move that could either signal de-escalation or a strategic reset, depending on what replaces it.
The Humanitarian Cost The Markets Are Not Pricing
The World Bank and IMF have both issued increasingly dire estimates. If the constraint on shipping through the Strait of Hormuz drags on through midyear, the global economy faces an additional 32 million people falling into poverty and 45 million into extreme hunger. Diesel availability for agricultural use in low-income markets is the proximate channel. Food price inflation in the developing world is already running well ahead of headline numbers. The political consequences in places like Egypt, Pakistan, and parts of West Africa are beginning to map onto the energy chart with uncomfortable precision.
The Bottom Line For Markets And Consumers
The Strait of Hormuz crisis is no longer a tail risk. It is the central macro story of the second quarter, and it is the variable most likely to determine the path of US inflation, the Fed’s transition under Warsh, and the political backdrop heading into the 2026 midterms. Equity markets so far have absorbed the move with surprising resilience, with the S&P 500 hitting fresh all-time highs Thursday on AI-led earnings strength. That divergence between energy stress and risk asset performance is unlikely to last forever.
For investors, the playbook involves leaning into integrated energy names with strong balance sheets, hedging cyclicals with high freight exposure, and keeping a closer eye than usual on inflation breakeven rates and the Fed’s evolving forward guidance. For consumers, the message is simpler. Gasoline at $6 a gallon in California is the leading edge of an energy shock that has not yet fully bled into household budgets. It probably will. For real-time updates on the energy markets, see Reuters Energy. For US gasoline data, the EIA’s weekly retail report remains the cleanest source.