The global oil supply shortfall is deepening as the Iran war enters its third week, and US oil prices are accelerating toward the $4 per gallon threshold. Analyst Patrick De Haan has forecast Monday pump prices of $3.80 to $3.85 per gallon, while explicitly warning that $4 remains possible in the near term. The deepening supply shortfall, driven by both infrastructure strikes and strategic shipping blockades, is the primary engine of the price acceleration.
The supply shortfall first materialized on February 28, when US and Israeli strikes on Iran triggered the disruptions that have driven the national gasoline average 23% higher from below $3 per gallon to $3.70. Three weeks of sustained military operations have progressively deepened the shortfall, as each new attack removes additional supply capacity and the Hormuz blockade prevents any compensating supply from reaching international markets. The deepening shortfall has pushed prices to within striking distance of the $4 threshold.
The US assault on Kharg Island last Friday deepened the supply shortfall further by targeting the facility most central to Iran’s oil export operations. Iran’s continuation of the Strait of Hormuz blockade has sustained the removal of roughly 20% of global daily oil supply from international markets. Brent crude ranged from $103 to $106 per barrel Monday, while US crude held near $94 after briefly touching $100 the previous day.
California faces average pump prices above $5 per gallon, with some Los Angeles stations charging over $8. Diesel for commercial freight could reach $5.15 per gallon nationally, adding inflationary pressure across the consumer goods supply chain. Oil executives from Exxon, Conoco, and Chevron have each raised urgent concerns with White House officials about the deepening supply shortfall, with Exxon’s Darren Woods specifically warning about the price-accelerating effect of speculative market activity.
Wall Street opened Monday cautiously, the S&P 500 gaining around 1% as oil prices briefly retreated. Oil sector shares have reached all-time highs since the conflict began. The acceleration of US oil prices toward $4 reflects the growing severity of a global supply shortfall that will only begin to reverse when the Iran war ends and the Strait of Hormuz is reopened.