Higher prices for gas, groceries and flights will outlast the Iran war, experts say

A tentative U.S.–Iran agreement to end the war has economists weighing when prices for gasoline, groceries and airline tickets will ease after months of elevated costs. The conflict disrupted fertilizer, food and footwear supply chains and halted crude flows through the Strait of Hormuz. Following the news, U.S. benchmark crude traded around $80 a barrel, down from over $120 at the war’s peak and about $67 before the conflict, though relief for consumers will not be immediate. Brett House of Columbia Business School cautioned that, despite three months of fighting, nothing has been achieved to make the American or global consumer better off.

Analysts say the rebound will be slow because refiners purchase crude months in advance, so even lower prices may take time to translate into cheaper gasoline. Regions with limited refining capacity, such as the U.S. West Coast, could see prices fall more slowly. The IEA notes that in some Asian and African countries reliant on Middle East oil, schools and government offices paused operations or shifted to remote work during the disruption. The bottom line is that getting back to normal will be a lengthy, multi-party process.

Airfares are unlikely to drop quickly because carriers hedge fuel, adjust schedules gradually and price tickets based on demand. Weeks or months may pass before lower oil and jet fuel costs pass through to fares. Michael Lynch of the Energy Policy Research Foundation observed that returning to normal will be a lengthy process and that opening the Strait of Hormuz is just the beginning.