·
Oil
prices remain 23% higher: Crude is around $89 per barrel, up 23%
from pre-war levels, despite expectations that a prolonged Strait of Hormuz
conflict would push prices much higher.
·
Global
oil supply adapts: Lower Middle East demand, releases from
strategic reserves, higher US and Americas production, alternative Gulf export
routes and reduced Chinese
oil purchases have helped contain the price surge.
·
China
is a key factor: Future oil prices will depend partly on
whether China resumes
higher crude imports, alongside developments affecting traffic
through the Strait of Hormuz.
·
Refining
capacity is the bigger concern:
Damage to refineries in the Middle East and Russia has reduced the world’s
ability to convert crude into gasoline
and diesel, keeping fuel prices high.
·
US
gasoline prices up 38%: The national average
reached $4.09 per gallon,
compared with pre-war levels, with significant regional differences—about $5.65 in California versus $3.63 in
Texas.
·
Diesel
prices rise nearly 50%: Diesel has reached $5.61 per gallon,
approaching its 2022 record and increasing costs for trucks, trains and heavy
machinery.
·
Inflationary
impact: Higher diesel costs are likely to be
passed on by businesses through higher prices for goods and services, adding to
US inflationary pressures.
·
Strait
of Hormuz traffic collapses: Daily shipping through
the critical waterway has fallen from more
than 100 ships before the war to around 12 ships recently.
·
Shipping
remains dangerous: At least 71 attacks on ships have occurred since the
war began, killing 19
sailors. Two seafarers were killed in the past two weeks and
another remains missing.
·
US
Navy escorts ships: The US has encouraged commercial vessels
to transit the strait and has provided naval guidance through the southern,
Omani-controlled section.
·
June
reopening attempt failed: A US-Iran agreement
temporarily restored traffic to more than 60 ships per day, but collapsed after three
days, followed by renewed US restrictions on Iranian ports.
·
Alternative
shipping routes are costly: Saudi Arabia has
shifted more crude exports through the Red Sea, while Houthi threats have
created additional risks and forced companies to seek more complicated routes.
·
Iran
seeks greater control: Tehran has proposed a
system under which ships would pay
for passage through the Strait of Hormuz, which had previously
been free.
·
Stocks
recover strongly: The S&P 500 is up 13% from the start of the
war after initially declining, reaching record highs in August.
·
AI
boom offsets geopolitical concerns:
Strong earnings from AI-related companies, particularly Nvidia, have shifted
investor attention away from the Iran conflict.
·
Bond
markets remain nervous: The 10-year US Treasury yield
has risen from around 4%
to nearly 4.7%, reflecting concerns over inflation, government
debt, economic growth and geopolitical risks.
·
Higher
rates pose longer-term risks: Elevated bond yields
could keep borrowing costs high for businesses and consumers, including AI
companies financing massive data-centre investments.
The
six-month-old Iran conflict has settled into a new but costly global economic normal: oil
supplies have adapted, but gasoline and diesel remain expensive, Strait of
Hormuz shipping is severely disrupted, and bond markets are increasingly
concerned about persistent inflation and higher interest rates.
[ABS News Service/28.08.2026]
After
the United States and Israel attacked Iran on Feb. 28, the price of oil immediately
jumped, interest rates rose and stocks slumped. Within a week, American drivers
were paying 34 percent more for gasoline, as the flow of energy from the Persian
Gulf froze.
Six
months later, the war has locked into a fragile holding pattern. Oil is getting
out, but less of it, and gas prices remain high. Ships are moving but fewer than
before the war, and through different routes. Investors in stocks and bonds have
turned their attention — mostly — to other issues.
Here’s
where markets stand after six months of war.
The price of oil is up more
than 20 percent.
At
$89 a barrel, oil costs 23 percent more than it did before the war, driving up prices
for everything from gasoline to plastics.
But
had you asked most energy executives six months ago to predict oil prices after
such a long conflict over the Strait of Hormuz, they would have picked a much higher
number. The global economy has been surprisingly adept at getting by without all
of the energy it used to buy from the Persian Gulf, one of the most important oil-producing
regions in the world.
There
are a few reasons for that. Countries that are highly dependent on oil from the
Middle East cut back. The Trump administration and other governments withdrew oil
from strategic reserves. Companies across the Americas pumped more oil than expected,
and many of those in the Gulf found ways to export oil despite the dangers of traveling
through the strait. And in a move that few anticipated, China — typically the world’s
biggest oil importer — slashed purchases.
Looking
ahead: Where prices go from here will depend on, among other things, how long the
United States and Iran continue to interfere with traffic in the strait and whether
China starts importing more oil. For now, though, the market appears to be settling
into a new normal. The bigger concern is that wars — in the Middle East and between
Russia and Ukraine — have knocked out refineries, leaving the world with less capacity
to turn oil into gasoline and diesel and making those fuels much more expensive.
Prices at the pump are higher.
Rising
oil prices translate to higher gas prices, and the jump in the cost of gasoline
is perhaps the most visible effect of the war for American consumers. The U.S. national
average price of unleaded gasoline, at $4.09 per gallon on Friday, has risen 38
percent since the start of the war, according to the AAA motor club.
Prices
are rising largely because of costlier crude oil, which accounts for roughly half
of retail prices at the pump, according to the U.S. Energy Information Administration.
Taxes, transport costs and the profits earned by gas stations constitute much of
the rest, but the effects are not spread evenly: Gas is $5.65 per gallon on average
in California versus $3.63 in Texas.
The
price of diesel has risen even faster than gasoline, approaching the record high
it set in 2022. At $5.61 a gallon, prices are up nearly 50 percent from prewar levels.
Diesel
powers large parts of the United States, used by trains, trucks and other heavy
machinery. As prices climb, businesses often pass on the costs to customers, with
broad implications for inflation.
Prices
are rising because there are fewer refineries making diesel. The volume of diesel
produced in the Middle East has dropped amid the fighting, with the effects compounded
by the buckling of Russia’s refining capacity after Ukrainian attacks on its facilities.
Looking
ahead: Energy analysts often describe the swing in fuel prices as “up like a rocket,
down like a feather” — a phenomenon that means gas costs quickly track increases
in the price of oil but are slow to follow when it falls. When crude dropped to
its prewar price for a brief spell in late June and early July, the average cost
of gas remained 30 percent higher than before the war. That pattern is expected
to continue.
Shipping in the Middle East
is scrambled.
Shipping
traffic through the Strait of Hormuz, a vital waterway that carried one-fifth of
the world’s oil before the war, is still mostly paralyzed.
Before
the war, more than 100 ships per day transited the strait between Iran and Oman.
Now, the traffic is at a trickle. Only around a dozen ships per day have recently
passed through the strait, according to Kpler, a maritime data company.
The
Trump administration has urged ships to make the passage, with the U.S. Navy guiding
them through the southern part of the strait in Omani waters. As of this week, U.S.
forces had cleared the mines that Iran planted in the strait, according to Capt.
Tim Hawkins, a U.S. Central Command spokesman.
But
passing through the strait remains perilous. Two seafarers have been killed in the
last two weeks, and another is missing. In total, there have been at least 71 attacks
on ships since the start of the war, and 19 sailors have been killed.
In
June, Iran and the United States signed a deal to reopen the strait, and for three
days more than 60 ships passed through daily. But the agreement fell apart, and
U.S. forces reimposed a blockade on Iranian ports. Iran has sought to assert its
control by creating a new system in which it charges ships for passage through the
strait, which was previously free.
The
turmoil has forced many shipping companies to bypass the strait. Saudi Arabia, the
region’s biggest oil producer, has shifted to export more crude via the Red Sea.
But
then the Iranian-backed Houthi militia, which controls part of Yemen, threatened
to blockade Saudi ships in the Red Sea. A new workaround, through the northern part
of the Red Sea, is more complicated and costly. Energy exports from the Persian
Gulf remain below what they were before the war.
Looking
ahead: It’s unclear when — or even if, some experts believe — shipping in the region
will return to what it was before the war. This week, Iran and Oman, an American
ally, said they were discussing a plan to manage traffic in the strait. There were
few details about how such an agreement would work.
Stocks are up. Bonds are looking
shakier.
Investors
have learned over the years not to pay much heed to geopolitics. Short, sharp slumps
in the stock market followed shutdowns during the Covid-19 pandemic, Russia’s full-scale
invasion of Ukraine and Hamas’s attack on Israel, before the market swiftly rebounded
and ascended to new heights.
The
S&P 500 dropped in the first month of the war, then recovered to hit a series
of fresh record highs, the last one in the middle of August. The index is now 13
percent higher since the start of the war.
With
oil prices in the futures market settling under $90 a barrel through the end of
the year, stock market investors have largely turned their attention elsewhere.
In particular, their focus has centered on the enormous
profits generated by companies at the forefront of artificial intelligence, with
quarterly earnings continually surpassing expectations.
This
week, Nvidia, the tech giant, more than doubled its quarterly revenue, to almost
$100 billion, and showed few signs of slowing down.
As
expectations increase about how much cash Nvidia and others riding the A.I. boom
might generate in the future, so have their stock prices, which have a major influence
on indexes because of their multitrillion-dollar market values. So far, blockbuster
corporate earnings have largely shielded stock investors from other worries, not
just the war in Iran.
Bond
investors appear more anxious, with rising yields — which move in the opposite direction
to prices — reflecting higher expected economic growth because of A.I. but also
intensifying worries about inflation, government debt and geopolitical uncertainty.
The 10-year Treasury yield, which influences mortgages and business loans, has risen
to just under 4.7 percent from around 4 percent six months ago.
Looking
ahead: Over time, higher bond yields result in higher interest rates throughout
the economy, including for the A.I. companies borrowing billions of dollars to build
data centers. Higher interest costs tend to eat into corporate
profits, a worry for stock investors. “The bottom line for investors is that interest
rates are going to stay higher for longer,” said Torsten Slok, chief economist at
Apollo Global Management.