US Gas Prices Just Hit $3.98. The Iran War Caused the Biggest One-Month Jump Since Hurricane Katrina. Here Is What Comes Next.
US Gas Prices Just Hit $3.98 a Gallon. The Iran War Caused the Biggest Single-Month Price Jump Since Hurricane Katrina in 2005. Here Is What Comes Next — for Your Gas Tank, Your Grocery Bill, and the Broader Economy.
In one month, the average price of a gallon of regular gasoline in the United States has risen $1.02 — a 34 percent increase. That rate of increase is faster than what followed Hurricane Katrina and faster than what followed Russia's invasion of Ukraine in 2022. The war in Iran caused it. Here is where gas prices go from here, why diesel matters more than gasoline, and what the Iran war is doing to the prices of things you buy that have nothing to do with driving.
By NowCastDaily Economics Desk | March 26, 2026 | Economy | 11 min read
The AAA data is stark. On February 27 — the day before Operation Epic Fury began — the national average for regular unleaded gasoline in the United States was $2.94 a gallon. By March 23, Day 24 of the war, that number had reached $3.96. By March 26, Day 27, it sits at $3.98. The $1.02 increase in 27 days represents a 34 percent jump. CNN Business reported that the one-month gain is larger than what followed Hurricane Katrina in 2005, which itself disrupted 25 percent of US oil production. It is also larger than the monthly jump that followed Russia's invasion of Ukraine in 2022 — which eventually pushed prices to a record $5.02 a gallon. That peak is now visible from where prices currently stand.
The mechanism is straightforward. The Strait of Hormuz normally carries approximately 20 million barrels of oil per day — about 20 percent of global consumption. Iran effectively closed the waterway on February 28, the first day of the war, through a combination of mine-laying and attacks on vessels attempting to transit. Global oil supply dropped by approximately 11 million barrels per day, per the IEA's estimate on March 23. Brent crude, the international benchmark, climbed from $66 a barrel pre-war to above $113 before falling back to the $102 range after Trump's five-day pause announcement. Even at $102, oil is 54 percent above where it was when the war started.
Why Diesel Matters More Than Gasoline
Most of the media attention on energy prices focuses on gasoline — the fuel ordinary Americans buy at the pump. But the more consequential number for the broader economy is diesel. The US average diesel price has risen $1.61 a gallon since the war began, per CNN Day 26 reporting, to $5.37 nationally. That is a 43 percent increase, larger in absolute and percentage terms than the gasoline increase.
Diesel powers virtually every freight truck in America. When diesel prices rise by $1.61 a gallon and a long-haul truck gets between 6 and 8 miles per gallon, a Los Angeles to Chicago run — about 2,000 miles — costs roughly $400 to $535 more in fuel alone than it did a month ago. Trucking companies pass those costs on through fuel surcharges, which are written into freight contracts. The surcharges hit shippers. Shippers pass the costs to retailers. Retailers pass them to consumers. The diesel price increase in the 27 days since the war began will show up in grocery store prices, Amazon shipping costs, hardware store prices, and the cost of virtually every physical product sold in America — not all at once, but in waves over the next 4 to 8 weeks as the supply chain adjusts.
The US Postal Service announced this week that it will charge a first-ever 8 percent fuel surcharge on packages beginning April 26, per CNN's Day 26 reporting. FedEx and UPS have automatic fuel surcharge mechanisms built into their contracts that have already activated. The USPS decision is significant because it is the last major US carrier to have maintained flat-rate pricing regardless of fuel costs — its switch marks the point at which the energy price increase has fully permeated the US logistics network.
The Food Price Connection: Fertilizer Through the Strait
The Strait of Hormuz carries more than oil. Approximately 30 percent of the world's raw materials for making fertilizer — including ammonia, urea, and potash — are shipped through the waterway, per CNN's reporting on March 26. The closure of the Strait has disrupted fertilizer supply chains that are critical for food production in South Asia, Sub-Saharan Africa, and parts of Latin America.
The connection between fertilizer supply disruptions and food prices takes longer to materialize than the fuel price connection — fertilizer bought this month affects crops planted this spring, which reach markets in late summer and fall. But the trajectory is already visible in futures markets. Corn futures, wheat futures, and soybean futures have all risen since the war began, as traders price in the probability of reduced yields from fertilizer-constrained plantings in key producing regions.
Jorge Moreira da Silva, a senior United Nations official, told PBS NewsHour last week that the world has already seen "exponential price hikes in oil, fuel, and gas" with a "far-reaching impact on millions, primarily in Asian and African developing countries." In lower-income countries where populations spend 40 to 60 percent of household income on food, a 20 to 30 percent increase in food prices is not an economic inconvenience. It is a food security crisis. The UN's World Food Programme has described the situation as requiring emergency funding increases that are not yet authorized.
What the Historical Comparisons Tell Us About Where Prices Go
Two historical comparisons are worth examining for what they predict about the trajectory from here. After Hurricane Katrina in August 2005, US gas prices rose sharply and then fell as Gulf of Mexico production was restored — a process that took about three months. By November 2005, prices were back near pre-Katrina levels. The disruption was supply-side but geographically limited and temporary: no war, no political will to maintain the disruption, physical infrastructure that could be repaired.
After Russia's invasion of Ukraine in February 2022, US gas prices rose from roughly $3.50 to $5.02 a gallon by June 2022 — a four-month climb. They then declined as the US released strategic reserves, Europe secured alternative LNG sources, and global demand adjusted. But prices did not return to pre-Ukraine levels for over a year, and the energy cost contributed to the inflation environment that drove the Federal Reserve to raise interest rates at its fastest pace since the 1980s.
The current situation is more like the Ukraine scenario than the Katrina scenario in terms of its political character — there is no natural disaster to repair, only a political conflict to resolve. But it is worse than the Ukraine scenario in terms of scale: the IEA confirmed the current disruption is larger than the Ukraine energy shock plus the 1973 and 1979 oil crises combined. If the war continues for two to three more months — which both US administration officials and Israeli military sources have suggested is likely — the historical precedent for price trajectories suggests continued increases before any meaningful reversal.
📊 NowCast Analysis: The Political Price of $4 Gas
Our analysis suggests that $4 a gallon is the political threshold the Trump administration is most focused on, not $5. The reason: polling consistently shows that American voter satisfaction with a president's economic management begins deteriorating sharply when gas prices cross $4. At $5, the deterioration accelerates. Trump's approval ratings on economic management were among his strongest assets coming into 2026. A sustained period above $4 gas changes that political equation in ways that create pressure for diplomatic resolution regardless of military objectives.
The DCCC — the Democratic Congressional Campaign Committee — launched a geotargeted digital advertising campaign this week specifically hitting Republicans for gas prices, per CNBC's March 26 reporting. The ads are running in competitive House districts. The midterm elections are in November 2026. Eight months is enough time for the energy price story to either resolve or become the defining issue of the cycle. The five-day pause, the 15-point plan, the Pakistan channel — all of these have a domestic political dimension that runs parallel to their strategic significance. Watch what happens to gas prices the week before and after any ceasefire announcement. The trajectory will tell you whether the diplomacy is genuine or managed.
📌 Key Facts
- $3.98/gallon — US national average gasoline, March 26, per AAA; 23rd consecutive daily increase
- +$1.02 (+34%) — One-month price increase; larger than Katrina 2005 and Ukraine 2022 monthly jumps
- $5.37/gallon — US national average diesel, up $1.61 (+43%) since war began; hits all freight costs
- 8% — USPS fuel surcharge on packages starting April 26; first ever flat-rate price change
- 30% — Share of global fertilizer raw materials shipped through the Strait of Hormuz
- $5.02 — US gas price record set in June 2022 after Russia-Ukraine war; current trajectory approaches it
- $102/barrel — Brent crude as of March 26; 54% above pre-war level of $66
❓ Frequently Asked Questions
Q: Why do American gas prices rise when the Strait of Hormuz closes, if the US imports little Gulf oil?
Oil is a globally traded commodity priced against international benchmarks — primarily Brent crude and WTI (West Texas Intermediate). When the Strait closure removes 11 million barrels per day from global supply, the global benchmark price rises regardless of where any specific barrel comes from. American oil companies sell into global markets at global prices. When Brent rises to $113, US domestic producers sell at a price close to that benchmark. US refiners pay more for crude, pass the cost to gasoline and diesel prices. The domestic supply situation is essentially irrelevant to what you pay at the pump.
Q: What practical steps can households take right now to reduce exposure?
The IEA issued specific guidance: reduce highway speed by 6 mph (improves fuel economy roughly 8%), consolidate driving trips, use public transit where available. For home heating: lock in heating oil prices now at fixed-rate contracts before summer ends — prices will be set for next winter based on current market conditions. For groceries: buying non-perishable staples now before the fertilizer supply chain disruption hits food prices in late summer makes economic sense. For driving costs overall: if you have a flex-fuel vehicle, check whether E85 ethanol is available in your area — it is currently priced below regular gasoline.
Q: If a ceasefire is announced tomorrow, how fast would gas prices fall?
Oil futures would fall immediately — within minutes of a credible ceasefire announcement, as they did with Trump's five-day pause announcement. But pump prices lag futures by roughly 2 to 4 weeks, because gasoline already in the distribution system was refined from oil purchased at higher prices. A ceasefire announcement today would likely reduce pump prices by 30 to 40 cents over the following month. Full return to pre-war levels would take longer — the Strait needs to physically reopen, mines need to be cleared, tanker traffic needs to resume, and insurance needs to be reinstated. Energy analysts estimate 6 to 8 weeks from ceasefire announcement to meaningful supply restoration.
⚡ NCD Bottom Line: $3.98 a gallon today. The trajectory toward $5 is visible from here. The Iran war is now the primary driver of US household costs — at the pump, at the grocery store, and in every package delivered to your door. The USPS surcharge, starting April 26, is the clearest single signal that the energy price increase has permanently permeated the US economy until the Strait reopens. The most expensive part of this war for most Americans is not what it costs in Washington. It's what it costs every time they fill their tank.
Sources: CNN — Day 26: Gas Prices, USPS Surcharge · CNN Business — Oil and Fuel Price Moves · NPR — Iran War Energy Impact, March 26
NowCastDaily Economics Desk
NowCastDaily's economics team covers energy markets, inflation, and the economic impact of global events on American households and the world economy.
