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paul krugman
'You Should Be Alarmed,' Says Economist as Trump's Iran War Pushes US Gas Past $4 Per Gallon
"Talk to or read energy experts—people who focus on the physical side of the oil crisis—and their hair is on fire."
Mar 31, 2026
Gas prices in the US have surged to a four-year high, and Nobel Prize-winning economist Paul Krugman is warning that the worst is likely yet to come.
Amid a Tuesday projection from AAA that average US gas prices had hit $4 per gallon for the first time since 2022, Krugman published an analysis of the petroleum market in which he projected that the price of oil will go even higher in the coming weeks as the global economy runs into supply shortages caused by President Donald Trump's war against Iran.
Krugman argued that oil price hikes have actually been tame so far because physical supplies have remained steady in recent weeks, as tankers that had already passed through the Strait of Hormuz before the start of the war have continued making scheduled deliveries.
That "grace period," as Krugman described it, is about to end as speculative market prices run into the hard realities of physical shortages.
What this fundamentally means, wrote Krugman, is "you should be alarmed."
"Once the crisis gets physical, there will no longer be room for jawboning the markets," Krugman wrote. "Since the war began there have been several occasions on which Donald Trump has been able to talk prices down by asserting that meaningful negotiations are underway... but that won’t work once the oil runs out. So prices will have to rise."
As for how far prices will go up, Krugman calculated that with only medium disruption to global oil production and medium demand elasticity, the price of oil would rise to $152 per barrel, which would push US gas prices well over $4.50 per gallon.
Making matters worse, Krugman found that it wouldn't take much additional disruption to push the price of oil into worse-case scenarios where it would top $200 per barrel.
"If oil really does go to $200 or more, it’s all too easy to envisage a full-blown global economic crisis, with an inflation surge and quite likely a recession," Krugman commented. "Ever since this war began I’ve noticed a sharp divide in sentiment among experts. Finance and macroeconomics experts have been relatively sanguine about our ability to ride out this storm. But talk to or read energy experts—people who focus on the physical side of the oil crisis—and their hair is on fire."
Petroleum industry analyst Patrick De Haan on Tuesday highlighted the major increases in the price of diesel fuel since the start of the Iran war, which could add even more pain to the US economy in the form of higher shipping costs for goods.
"Can't overstate the impact that's coming down the pipeline to truckers, farmers, logistics, and beyond," De Haan wrote in a social media post. "The US economy runs on diesel with several states setting new all-time highs for diesel, while others are seeing largest monthly increases of all time."
De Haan also posted a chart highlighting the states with the biggest diesel price increases since late February, and it showed swing states Arizona, Nevada, and North Carolina faced the largest surges, with prices up more than 57% in just one month in each state.
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'The Situation Is Scary': Global Economic Chaos as Trump’s Iran War Sends Markets Diving
"To me, it was not just the worst-case scenario," said one economic analyst. "It was an unthinkable scenario."
Mar 09, 2026
President Donald Trump's unprovoked and unconstitutional war against Iran is sending shockwaves across the global economy in the form of skyrocketing oil prices and diving financial markets.
The prices of both Brent crude oil and WTI crude oil futures on Monday surged past $100 per barrel, as countries across the Middle East announced production cuts in the wake of chaos and destruction caused by the Iran war.
The impact of the price surge on the US stock market was immediate, as the Dow Jones Industrial Average opened Monday trading down by more than 600 points, while the Nasdaq dropped by 300 points.
According to a Monday report from the Wall Street Journal, both Iraq and Kuwait have announced oil production curbs because they have been unable to ship their supply through the Strait of Hormuz and have thus run out of space to store excess petroleum.
JPMorgan Chase analyst Natasha Kaneva noted to the Journal that this is the first time in recorded history that the Strait of Hormuz has ever been completely closed off for shipping, and warned the economic consequences would be severe.
"To me, it was not just the worst-case scenario," Kaneva said of the strait's closing. "It was an unthinkable scenario."
The Journal wrote that Trump's decision to launch a war with Iran has already sparked "the most severe energy crisis since the 1970s," which is now "threatening the global economy."
Petroleum industry analyst Patrick De Haan wrote in a Monday analysis that US drivers should expect to feel the impact of this oil shock in the coming days.
"Gasoline prices in many states could climb another 20 to 50 cents per gallon this week, with price-cycling markets potentially seeing increases as early as today," De Haan projected. "Diesel may rise even more sharply, with increases of 35 to 75 cents per gallon possible as global distillate markets react."
In a Monday analysis posted on his Substack page, Nobel Prize-winning economist Paul Krugman dove into the logistics of stopping and restarting oil production, and argued that the impact of the strait's closure will grow significantly as time goes on.
"As the Strait remains closed, producers are shutting down, and this isn’t like turning off a tap that can be quickly restarted," Krugman explained. "There’s apparently a real nonlinearity here: a two-week closure of the Strait has much more than twice the adverse impact on global oil supply as a one-week closure. If this goes on for multiple weeks... oil prices, which retreated slightly off their highs early this morning, could go much higher."
Krugman said that the shock was not yet bad enough to make an economic crisis inevitable because the US is much less dependent on oil than it was in the 1970s.
Nonetheless, Krugman cautioned, "the situation is scary."
Punchbowl News reported on Monday that the politics of the Iran war "have to worry" incumbent Republicans who were already in real danger of losing their majority in the US House of Representatives even before Trump launched an illegal war.
"With the Strait of Hormuz closed, oil prices have soared to more than $100 per barrel (from just under $70 per barrel 10 days ago)," wrote Punchbowl News. "There’s been a huge spike in gas prices nationally."
The report added that Trump has not been helping his party by expressing indifference bordering on hostility to Americans' concerns about how his war will impact their personal finances.
"Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and World, Safety and Peace," Trump wrote in a Sunday Truth Social post. "ONLY FOOLS WOULD THINK DIFFERENTLY!"
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'Absolutely Massive' Price Shocks Coming as Trump's Iran War Drives Up Gas, Diesel Prices
"What should really terrify Republicans is... the futures price on wholesale gasoline," said economist Paul Krugman.
Mar 04, 2026
President Donald Trump's unprovoked attack on Iran has sent oil prices surging, and it's already hurting Americans at the gas pump.
Petroleum industry analyst Patrick De Haan reported on Wednesday that the average US price for diesel has hit $4 per gallon, the highest it's been since April 2024.
De Haan also projected that the price of diesel would keep rising in the coming days before eventually reaching a price in the range of $4.25 to $4.45 per gallon.
The average price of gasoline is now approaching $3.20 per gallon, De Haan reported, and is projected to rise to at least $3.30 per gallon in the coming days. According to data from the US Energy Information Administration, average US gas prices haven't been that high since September 2024.
Nobel Prize-winning economist Paul Krugman on Wednesday flagged data showing that the price of Reformulated Blendstock for Oxygenate Blending (RBOB) gasoline futures contracts has been going through the roof since the start of the Iran war.
"What should really terrify Republicans is RBOB—the futures price on wholesale gasoline," Krugman commented. "This is up 75 cents a gallon since its low earlier this year."
According to a Wednesday report at Market Watch, researchers at the investment bank Goldman Sachs this week raised their price forecast for Brent crude oil for the second quarter of 2026 to $76 per barrel, an increase of $10.
What's more, Market Watch noted, Goldman is projecting that the price of Brent crude could hit $100 per barrel if the Strait of Hormuz remains closed for the next five weeks due to the war.
Goldman isn't the only investment bank projecting sky-high oil prices if the Strait of Hormuz stays closed for a prolonged period, as JPMorgan Chase earlier this week projected that the price of Brent crude could top $120 if the Iran conflict drags on, according to a Monday report from Market Watch.
Robert Brooks, senior fellow at the Brookings Institution's Global Economy and Development program, said in an interview with Seeking Alpha that global investors at the moment seem to be underestimating the economic risks of a prolonged conflict with Iran, citing "a weird tendency in markets to downplay unexpected shocks when they happen.”
However, Brooks told Seeking Alpha that what's happening with the global oil market right now "is absolutely massive" and should not be ignored.
Trump so far has not outlined any end game for the war he started, and Defense Secretary Pete Hegseth on Wednesday boasted that the Trump administration was "playing for keeps" by delivering "death and destruction from the sky all day" on Iran.
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