Oil Prices Spike—And Fall—As Iran Downplays Israel’s Reported Airstrikes: Here’s How That Could Affect Gas Prices

TOPLINE

Oil prices briefly surged Friday morning in the wake of Israel’s reported airstrike on Iran, and then quickly dropped following Iran state media’s apparent downplaying of those strikes, as conflict in the Middle East continues to leave behind lingering effects on already climbing oil and gasoline prices.

KEY FACTS

Brent Crude, an international benchmark, shot up nearly 2% Friday morning to a peak just under $88 per barrel, though the benchmark has since dropped to roughly $87.50, representing a marginal 0.5% uptick on the day.

National benchmark West Texas Intermediate also increased by roughly 2% Friday morning, following reports of an Israeli airstrike, though like the Brent, the WTI has also tapered off, dropping just above $83.50 per barrel.

AAA spokesperson Andrew Gross speculated international conflict could lead to instability in the oil market, saying in a statement on Thursday the “situation overseas with the war in the Middle East and Ukraine has the oil market on edge.”

While increases in the price of oil typically come with price hikes at the pump, analysts expect those effects on gasoline prices to be delayed, and multiple other factors could help swing the price of gas down from its $3.69 national average this week—its highest point since October, according to GasBuddy.

Patrick De Haan, head petroleum analyst for GasBuddy, said he expects gas prices to hit $3.70 per gallon in the near future, though the return of U.S. oil refineries from scheduled maintenance and Iran’s state media’s apparent downplaying of Israel’s attack, he said there’s “potential we’re nearing an end to the rise” in prices at the pump.

CONTRA

Another positive sign for gas prices has been an increase in crude oil inventories, which shot up this week by 2.7 million barrels, to approximately 460 million barrels, though it remains 6 million barrels below its level this time last year, according to the Energy Information Administration. Andrew Gross also estimated gas prices could plateau as U.S. demand hits a typical low ahead of Memorial Day. Gasoline demand in the U.S. declined narrowly from 8.84 million barrels in the week ending April 5 to 8.81 million barrels last week, according to EIA data, and is slightly below where it had been last April. Gross expects the national average gas price “may waffle a bit with small increases, some flat days, and even some price dips” as a result.

KEY BACKGROUND

Israel’s military early on Friday reportedly launched limited airstrikes in Iran, unnamed officials told multiple outlets. The reported strikes came several days after Iran’s unprecedented drone and ballistic missile strike on Israel days earlier, which Israeli officials said caused only minor damage. Iran’s attack itself was in retaliation for Israel’s airstrike earlier this month on an Iranian embassy in Syria, which killed at least 16 people, including two senior military leaders. Iranian state TV dismissed Friday’s strike, blasting it as “Israeli and American media propaganda.” Israel has not officially claimed responsibility for any strikes on Iran. Tensions between Iran and Israel have boiled over in recent months in the wake of Israel’s invasion of Gaza, which has left over 33,000 Palestinians dead, according to the Hamas-run Gaza Health Ministry. Israel estimates another 1,200 people were killed in Hamas’ Oct. 7 attack on southern Israel. Earlier this week, Iranian President Ebrahim Raisi threatened “fierce and severe” retaliation for the “tiniest invasion” by Israel, though world leaders have urged both sides to de-escalate the situation.