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Israel-Hamas war causes oil prices to spike. Here’s what U.S. drivers need to know

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Drivers fill up at a Shell gas station in Alhambra, California, on Oct. 2, 2023.
Frederic J. Brown | Afp | Getty Images

Oil prices jumped more than 3% after members of the militant group Hamas launched a surprise attack on Israel from the Gaza Strip last weekend.

However, neither Gaza nor Israel produce much petroleum, so the overall effect on oil and gas prices is likely to remain limited — as long as no third parties from in or outside the region become involved, according to industry experts.

“The impact on the oil price will be limited unless we see the ‘war’ between the two sides expand quickly to a regional war where the U.S. and Iran and other supporters of the parties get directly involved,” Middle East managing director of energy consultancy Facts Global Energy, Iman Nasseri, previously told CNBC.

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As long as the violence does not spread, oil and gas prices in the U.S. are likely to be unaffected.

Gas prices have been trending lower

Indeed, American drivers have yet to see effects from the conflict reflected at the gas station level. The average price for a gallon of regular gasoline in the U.S. on Monday was $3.70, down 11 cents from a week ago, according to AAA.

Downward pressures such as the jobs report and the possibility of further interest rate hikes from the Federal Reserve are likely to continue softening oil prices, said Patrick DeHaan, head of petroleum analysis at GasBuddy.

A fireball erupts during Israeli bombardment of Gaza City on Oct. 9, 2023.
Mohammed Abed | AFP | Getty Images

Additionally, the current hostilities are not “remotely close” — geographically or practically speaking — to Russia’s ongoing invasion of Ukraine, which started last year, said DeHaan.

Unlike Gaza and Israel, Russia is a primary oil and natural gas exporter. Iran, however, is “the wildcard to watch out for,” he added. Iran congratulated Hamas on its offensive against Israel but denied involvement in the initiative.

‘Diesel is going into its peak season’

Heating oil prices are expected to climb, mostly due to seasonality changes. Demand will rise as temperatures begin to drop, according to DeHaan.

“Diesel is going into its peak season because of the prominent use of heating oil in areas of the Northeast,” he said.

For now, drivers in the U.S. planning to take major road trips in the months ahead should not be too concerned, but best to keep an eye on the situation if they’re price sensitive, especially if turmoil escalates.

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