Strait of Hormuz: Impact & Response Hub

The White House’s temporary waiver of the Jones Act — a law requiring goods shipped between U.S. ports to use American-built and operated vessels — is intended to lower domestic fuel transportation costs. By allowing more ships to move oil and gasoline between U.S. ports, the policy increases competition and may reduce shipping expenses in some regions. However, transportation is only a small part of total fuel costs, so the overall impact on gas prices will be limited.

In reality, the benefits will be highly localized. Puerto Rico and Florida, which rely on Gulf Coast fuel shipments, may see slight relief or slower price increases. But for most of the U.S. — including the Northeast, Hawaii, and Alaska — the effect will be minimal due to existing supply patterns. With global oil market disruptions still driving prices, the waiver is unlikely to significantly lower prices at the pump nationwide.

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The current oil supply shock tied to the Iran conflict is, in many ways, more severe than the disruption caused by Russia’s 2022 invasion of Ukraine — temporarily removing up to 20% of global oil supply due to the Strait of Hormuz blockade. However, there are key differences that could prevent gas prices from reaching the same extremes.

Unlike in 2022, when sanctions lasted for years and oil markets were already tight, today’s prices started lower and markets are expecting a shorter disruption. The critical variable is timing: if the Strait reopens within weeks, price spikes may be contained. If closures persist into the summer, gas prices could exceed 2022 highs, creating a more prolonged impact for consumers and retailers.

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As gas prices rise amid the conflict with Iran, some consumers may wonder if stations are taking advantage — but early data tells a different story. Fuel retailers have actually seen profit margins dip immediately following the disruption, as rising oil prices increased wholesale gasoline costs (rack prices) passed down from refineries.

While pump prices have gone up, stations are largely maintaining typical margins and adjusting prices cautiously to manage volatility. In reality, gas stations aren’t benefiting from higher prices—they’re navigating tighter margins and higher costs, aiming to stay profitable while minimizing the impact on customers.

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With oil prices surging, it may seem like the U.S. or OPEC could simply increase production to stabilize the market — but the reality is far more complex. U.S. oil production requires significant time, investment, and long-term certainty, making companies hesitant to ramp up output during what could be a short-lived disruption.

Meanwhile, many key OPEC producers are unable to bring additional supply to market due to their reliance on the Strait of Hormuz, which remains effectively closed. Add in ongoing sanctions on Russia, and global supply options become even more constrained. Until the Strait of Hormuz reopens, there is no quick fix — leaving oil and gas prices elevated in the near term.

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Iran plays an outsized role in global oil markets — not because of how much oil it produces (just ~3% of global supply), but because of where it sits. Positioned along the Strait of Hormuz, a critical shipping chokepoint through which roughly 20% of the world’s oil flows, Iran effectively controls one of the most important arteries in global energy trade.

With the strait currently closed following recent conflict, a significant portion of global supply has been disrupted—driving sharp increases in oil and gas prices. Until the Strait of Hormuz reopens, any relief at the pump is likely to be short-lived, with ongoing volatility impacting both consumers and retailers.

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