Iran shutters Strait of Hormuz. Oil/gasoline prices soar.
The Strait of Hormuz is a narrow strip of waterway between Iran (to the north) and the countries of the United Arab Emirates and Oman to the south. The strait is 104 miles long and links the enclosed Persian Gulf to the open seafaring and shipping lanes of the Indian Ocean.
Until recently, most Americans have likely never heard of the Strait of Hormuz before. Its importance, however, is that it serves as the only maritime passage for the vast quantities of crude oil produced in the Middle East region. According to the U.S. Energy Information Administration (EIA), 25% of the world’s total crude oil produced each year passes through the Strait of Hormuz. Roughly 34% of all crude oil transported via seafaring ships also pass through this narrow waterway.
Since 2018, the U.S. has been the global leader in crude oil production. Last year, according to the EIA, the U.S. produced more than 13.5 million barrels of crude oil each day, accounting for 16% of all global production. Coming in at No. 2 is Russia, which delivers around 12% of global crude oil production.
But the Middle East remains a dominant source of the world’s energy supply. The region historically accounts for 30% of the world’s total crude oil production. In 2025, the Middle East produced roughly 31 million barrels per day. The region is home to Saudi Arabia, the world’s third largest producer of crude oil. Last year, Saudi Arabia produced 11% of the world’s crude oil output. Other notable oil-producing nations in the region are Iraq, the United Arab Emirates, Iran and Kuwait. Each respectively delivers 3%-5% of the world’s crude oil output.
But on Feb. 28, in a joint operation with Israel, the U.S. once again launched a direct military campaign against Iran. The aerial bombardments by U.S. and Israeli forces targeted Iranian leadership, nuclear facilities and military infrastructure.
Though heavily decimated by the ongoing attacks by U.S. and Israeli military forces, Iran’s last-ditch effort to retaliate has been to disrupt the flow of maritime traffic through the Strait of Hormuz. Over the past few weeks, Iran has been utilizing drone attacks, naval mines and missile threats, among other tactics, to turn the narrow strip of waterway into a war zone chokepoint. Iran’s goal is to halt, or severely restrict, commercial shipping lanes through the strait. These actions have caused a major surge in global crude oil prices as shipping companies have avoided the area due to the high risk of danger to their ships and crew.
West Texas Intermediate (WTI) is the benchmark grade of crude oil produced in the U.S. It serves as one of the three main pricing barometers of the global petroleum industry, alongside North Sea Brent and Dubai crude. But we need to remember that crude oil is a global commodity subject to the global forces of supply and demand. What happens halfway around the world can impact the price of crude oil here in the U.S.
In the days that preceded the Feb. 28 attack on Iran, a barrel of WTI was trading around $65. On March 9, a barrel of WTI reached an intraday high of $119.48 before settling at a closing price of $94.77. As of Thursday, WTI is trading close to $99 per barrel.
The U.S. is not just the world’s largest producer of crude oil, it’s also the largest consumer of crude oil. Each year, America accounts for roughly 20% of the world’s total crude oil consumption. In 2025, Americans consumed about 20.6 million barrels of crude oil each day. Crude oil is our No. 1 source of energy. On average, crude oil supplies 38% of our nation’s total energy consumption.
As the price of crude oil rises, so do many of its distillate products. From a barrel of crude oil we get gasoline, diesel fuel, kerosene and heating oil. It’s used in the production of plastics, lubricants, fertilizers, rubber and synthetic textiles, among many others.
According to the American Automobile Association, the national average price for a gallon of regular gas is $3.88. This is up $0.95 (32%) from the $2.93 average reported just one month ago.
For President Trump and Israel’s Prime Minister Benjamin Netanyahu, keeping the Strait of Hormuz free of danger has taken on a heightened level of priority. With crude oil prices near $100 per barrel, delaying this task only creates further economic uncertainty back in their home countries. Once the strait is secure, maritime traffic – and the vital crude oil it transports – should quickly resume and help drive prices lower once again.
Mark M. Grywacheski, Investment Advisor
Quad Cities Investment Group is a Registered Investment Adviser.
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