Iran war costs US consumers $41 billion as fuel prices surge

The war between the US and Iran has cost American consumers more than $41 billion in extra fuel expenses since it began in late February, according to a new study, as the closure of the Strait of Hormuz sends crude prices soaring and fuels broader inflation.

"We as a country are spending this enormous amount of money on extra fuel costs that could have been spent on improving American transportation infrastructure, which frankly needs the attention," said Jeff Colgan, a political science professor at Brown University’s Watson Institute for International and Public Affairs, which conducted the study.

The conflict has pushed international benchmark Brent crude up by more than 50% to around $110 a barrel. Consequently, US retail gasoline prices have risen 51% to $4.51 a gallon, while diesel has surged 54% to $5.65 a gallon, according to the American Automobile Association. The last time oil prices saw a similar spike was during the initial phase of the Russia-Ukraine war in 2022.

With the conflict showing no signs of abating and diplomatic efforts mediated by Pakistan yielding no breakthrough, sustained high energy prices threaten to stifle economic growth and weigh on President Trump's approval ratings, which are already near historic lows. A recent Financial Times poll showed 58% of Americans disapprove of his handling of living costs, creating a difficult political situation ahead of the November midterm elections.

China's Careful Calculus

China, a key ally of Iran and a major oil importer, has repeatedly urged for a diplomatic resolution while navigating a complex set of economic and strategic interests. Beijing is the buyer of more than 80 percent of Iran's oil but sources the majority of its supply from elsewhere, leaving it exposed to the Strait's closure. The country's massive 1.4-billion-barrel strategic reserve provides a significant buffer, enough to cover at least three months of import demand, according to the U.S. Energy Information Administration.

While rebuffing US appeals for a more direct military role in safeguarding the strait, Beijing has worked with Pakistan to bring the US and Iran to the negotiating table. "China has not intervened diplomatically in the Middle East out of concern that it did not have enough leverage on all parties," Michal Meidan, head of China Energy Research at the Oxford Institute for Energy Studies, told Newsweek. Despite its own reserves, rising global crude costs are squeezing Chinese manufacturing firms, and Beijing has resumed limited fuel exports to support regional economies.

Diplomatic Deadlock

Negotiations to reopen the strait remain at an impasse. Iran’s semi-official Fars news agency reported the US has demanded the removal of Iran's nuclear program uranium to the US and offered to unfreeze less than a quarter of Iran's suspended assets, conditions Tehran is unlikely to accept. Meanwhile, a recent drone attack that sparked a fire at a UAE nuclear plant underscores the fragility of the regional ceasefire and the risks of further escalation.

President Trump has maintained a hardline stance, stating his decision-making is not influenced by domestic inflation pressures. "I won't go into the financial position of Americans," Trump told media. "I don't think about anybody. I think about one thing—we're not going to have a nuclear weapon in Iran. That's all." This position comes as the US Treasury Department has escalated sanctions against Chinese refineries that purchase Iranian oil, a move Beijing has told its companies to ignore.

This article is for informational purposes only and does not constitute investment advice.