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Gas prices to increase 'modestly' despite recent oil volatilty

Ines Ferré

2 min read

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Gas prices could go up modestly in the coming weeks, given Friday's 7% oil price spike on the heels of the Israel-Iran conflict. But analysts view any increase as likely short-lived.

The national average price of gasoline stood at $3.14 per gallon on Monday, up about $0.02 from a week ago and $0.30 lower than a year ago, according to AAA data.

"Keep in mind gas prices are still 10% below last summer at this point," GasBuddy head of petroleum analysis Patrick De Haan told Yahoo Finance. "I still think we have a lot of room even for prices to go up modestly here over the next week or two."

On Monday, traders priced in a limited impact from the conflict after a Wall Street Journal report indicated Tehran may be willing to return to nuclear talks in order to deescalate the conflict.

Brent crude futures (BZ=F) fell almost 4% to around $71 per barrel, while West Texas Intermediate futures (CL=F) changed hands at around $70 per barrel.

"If the market senses that the attacks are coming to an end, prices will drop," Andy Lipow, president of Lipow Oil Associates, wrote in a note on Monday morning. "In the meantime, gasoline prices are expected to increase about 10 cents per gallon over the next few weeks."

Despite a brief rise, analysts expect prices at the pump to eventually fall in the months ahead.

"Ultimately, gasoline prices are headed sharply lower by the last 100 days of 2025, but for the moment, the drops have been arrested and prices will wobble a bit higher," Tom Kloza, chief market analyst at Turner, Mason & Co. said.

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Wall Street analysts were quick to point out that oil could head to $90 per barrel or even triple digits if the conflict spilled over into other areas or if the Strait of Hormuz, a key shipping waterway between the Persian Gulf and the Gulf of Oman, were to be blocked.

"The softest targets that Iran could target that could have the greatest impact on oil prices are tankers carrying oil destined for the USA transiting through the Strait of Hormuz," Lipow said.

He added, "They would not need to attack oil producing facilities in Saudia Arabia, Kuwait, UAE to cause a spike in oil prices."

The Organization of Petroleum Exporting Countries and its allies (OPEC+) has been steadily increasing output leading up to Israel's surprise attack on Iran last week.

Year-to-date oil prices are negative for the year, with WTI down more than 3%. Brent has declined roughly 5% during the same period.