As the U.S. and Iran continue to discuss a potential nuclear deal, the situation could push gas prices higher, according to AAA.
“Higher crude oil prices due to geopolitical tensions between the U.S. and Iran are… putting upward pressure on pump prices,” said the auto club this week.
As of Friday, AAA data showed that average gas prices in the U.S. were nearly $3 per gallon ($2.982), up slightly compared to one month ago ($2.888). However, they were down from $3.125 at this time last year.
Even after hours of indirect negotiations Thursday, the U.S. and Iran had still not come to a deal over Tehran’s nuclear program, according to the Associated Press. That leaves another Mideast war on the table, the outlet noted.
Axios said the meeting was “seen by many” in President Donald Trump’s administration “as a last chance for diplomacy before President Trump decides whether to launch a war.”
It noted that “an Iranian official told Al Jazeera that Iran had rejected the idea of permanently abandoning uranium enrichment, dismantling its nuclear facilities, and moving its uranium stockpiles out of the country.” U.S. negotiators were “disappointed” by the Iranian positions, Axios added.
“The official said Iran’s proposal includes reducing the uranium stockpile to low enrichment levels under the supervision of the International Atomic Energy Agency,” the outlet said.
CNN reported Friday that Navy Adm. Brad Cooper, commander of US Central Command, briefed President Donald Trump on potential military options in Iran, citing “a person familiar.” However, Vice President JD Vance said there’s “no chance” the US will get involved in a protracted conflict in the Middle East.
Since the Oct. 7, 2023 attack on Israel by Hamas – a terrorist organization that receives funding from Iran – the U.S. has also been involved in the Israel-Hamas War in Gaza. Secretary of State Marco Rubio is planning to travel to Israel next week to “discuss a range of regional priorities including Iran, Lebanon, and ongoing efforts to implement President Trump’s 20-Point Peace Plan for Gaza,” per the State Department.
The U.S. Embassy in Jerusalem issued a travel advisory update Friday authorizing the departure of non-emergency U.S. government personnel and family members of U.S. government personnel to leave Israel due to safety risks. Terrorism, civil unrest and armed conflict within 11.3 miles of the Gaza Periphery were listed as the reasons for the advisory.
Tension in the Middle East can have a big impact on oil, as about a fifth of the oil consumed globally flows through the Strait of Hormuz between Iran and Oman and Iran is a major oil producer, AAA said. Iran is also one of the Organization of Petroleum Exporting Countries (OPEC) member nations.
OPEC’s goal is to “coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry.”
On Feb. 19, crude oil prices climbed to $66.43 per barrel – the highest closing price of the year to that point, AAA noted. Escalating tensions between the U.S. and Iran were the reason for the spike, it said. By Friday, crude oil prices toped $70, Barron’s reported.
“Production cuts by OPEC+ in previous years tightened global crude oil supplies, which continued to impact prices,” AAA said.
Last year, OPEC boosted production, which helped bring down prices. It isn’t planning more production hikes through the first quarter of this year.
“The cartel meets on March 1 and will decide whether to resume production increase in April,” AAA said.
Marie Dodds, public affairs director for AAA Oregon/Idaho said that its unknown how this tension will continue impacting oil prices. However, she said that “higher crude oil prices mean higher pump prices.”
Crude oil makes up nearly half (47%) of gasoline and diesel prices, according to the U.S. Energy Information Administration. Refining makes up approximately 16% of the cost, distribution and marketing makes up 20% and taxes make up 17%.
In addition to the situation with Iran, the conflict in Gaza and other unrest in the Middle East, the situation in OPEC member nation Venezuela (including the U.S. capture of its former president) and the Russian invasion of Ukraine can impact gas prices. Like Iran, the U.S. and Saudi Arabia, Russia is a top global oil producer.
“Markets are watching for news on talks between the U.S. and Iran, with the U.S. wanting Iran to give up its nuclear program,” said AAA. “President Trump has ordered the largest American military buildup in the Middle East since the start of the Iraq War. Concerns also remain about ships carrying oil being able to travel through the Strait of Hormuz.”