The U.S. military strikes in Iran are raising questions about the impact on the oil and gas industry, including whether the widening conflict could result in higher energy prices for Americans.
Oil prices jumped 4% on Sunday night shortly after the start of trading, but retreated as experts speculated that Iran is unlikely to close the Strait of Hormuz, a major commercial waterway that the country partly controls and that is strategically vital for the flow of crude into global markets.
Still, the geopolitical crisis is sparking concerns that worsening hostilities could squeeze the world’s supply of oil, which would likely drive up gas and other energy costs, as well for other products refined from crude. Iran said Monday that it launched an attack on the U.S. Al Udeid Air Base in Qatar, with witnesses telling multiple news agencies that they saw what appeared to be missiles over the country.
Iran, a major producer of crude, controls the northern side of the Strait of Hormuz, which is used by ships carrying roughly 20% of the world’s daily supply of oil.
“In practice, Iranian efforts to ‘close’ the Strait could encompass a number of actions including attacking and detaining ships using the waterway, impeding navigability through the strait and, at the most extreme, laying mines in the sea,” noted David Oxley, chief climate and commodities economist at Capital Economics, in a report.
But, he added, “[S]o long as the conflict does not become a long-lasting war with no ‘off ramp,’ and disruption in the Strait remains limited to the lower-level actions seen up to now, we suspect that any initial spikes in global energy prices would dissipate before long.”
Here’s what to know about the Iran conflict’s potential impact on oil and gas prices.
What’s the impact so far on oil prices?
After surging in early trading on Monday, prices of Brent crude, the international standard, dipped 0.1% to $76.98 by midday. West Texas Intermediate (WTI) crude, the U.S. benchmark, fell 3.8% to $71.06.
Still, oil prices remain above their level before the hostilities between Israel and Iran began over a week ago, when a barrel of WTI crude was close to $68.
Although Wall Street experts predict that Iran is unlikely to close the Strait of Hormuz, they note that ongoing tensions in the region could disrupt the energy market and send prices soaring.
“Perhaps a bigger risk to the region’s oil supply would be Israeli air strikes on Iran’s oil production and export facilities, and/or attacks by Iranian proxy groups on oil production and export facilities in Iraq,” Eurasia Group analysts said in a June 23 report.
Israel so far has avoided targeting Iran’s oil export industry. But if it were to do so, such strikes could disrupt the flow of several million barrels per day, sending Brent crude prices above $80 per barrel, according to the political risk consultancy.
What would happen if the Strait of Hormuz is closed?
Because the Strait of Hormuz is just 21 miles wide at its narrowest point, it’s vulnerable to disruption. The channel connects the Persian Gulf to the Gulf of Oman and the Arabian Sea.
Although energy experts believe a closure of the Strait is unlikely, noting the adverse economic and geopolitical impact on Iran, they underline that a disruption to the flow of oil through the passage would send energy prices soaring.
Interruptions to oil passing through the channel would severely impact markets in China, India, Japan and South Korea, according to the Energy Information Administration (EIA), a branch of the U.S. Department of Energy.
NALINI LEPETIT-CHELLA,OMAR KAMAL/AFP via Getty Images) 
The U.S. imports only about 7% of its oil through the Strait of Hormuz. But any interference with shipments passing through the area could impact the global oil market by stifling supplies, according to experts.
“[W]hile Iran has not yet targeted the route, even a limited disruption would severely impact global supply,” Oxford Economics analysts said in a June 20 client note. “In a worst-case scenario, prices could spike to $130 per barrel and shave 0.8 percentage points off global GDP.”
The last time Brent crude topped $130 was in 2008, the result of a spike in energy demand and uncertainty in world energy supplies, according to the EIA. At the time, gasoline prices peaked at about $4.11 per gallon, or about $6.26 per gallon today after adjusting for inflation.
What’s the forecast for U.S. gas prices?
American drivers are likely to see higher gas prices at the pump over the next week, with prices jumping between 10 cents and 15 cents a gallon, GasBuddy analyst Patrick DeHaan said.
“Most/all of the recent and expected rise is due to the Middle East tensions/situation,” he said in an email to CBS MoneyWatch.
Even with that increase, U.S. drivers would still likely be paying less at the pump than they were a year ago. The average U.S. gas price now stands at $3.22 per gallon, down from $3.45 per gallon a year earlier, according to AAA.
