Not just gasoline: Rising costs from Iran conflict will impact food, plastics and electronics

Original article here

President Donald Trump said Wednesday that the conflict with Iran will come to an end soon, but the prime-time White House address did little to offer markets reassurance that the supply of oil in the Middle East will start flowing again.

On Thursday afternoon, the West Texas Intermediate price of oil, the American benchmark, soared nearly 12% higher than it was before Trump’s speech, hitting over $112 per barrel. This was even higher than the European benchmark, Brent, which was up around 6.6% at over $107 per barrel.

The markets reflect a feeling that there will be no immediate opening of the Strait of Hormuz, a narrow waterway off the coast of Iran through which 20% of the world’s oil flows.

The situation will impact prices of almost every consumer product manufactured, though how much and when remain a matter of speculation. Here’s a look at some of the primary goods that will see price increases in the coming days.

Trump: “We don’t need it”

In his speech, Trump tried to assure the U.S. that we produce enough energy to satisfy demand. “We produce more oil and gas than Saudi Arabia and Russia combined. And we’re in great shape for the future. The U.S. imports almost no oil through the Hormuz Strait and won’t be taking any in the future. We don’t need it,” the president said.

While the U.S. produces a lot of oil and imports very little oil from the Middle East, Americans will be competing with global demand. Major restrictions on supply anywhere in the world impact prices everywhere.

Every consumer product is produced by millions of supply chains stretching across hundreds of countries. While wind and solar supplies about 15% of the electricity generated worldwide, electricity is only about 21% of the total energy consumed. The bulk of it is industry and transportation, so those supply chains are powered almost entirely by fossil fuels.

Besides the energy powering those supply chains, countless products are derived from oil and natural gas. That means there’s really no product that won’t, to some degree, be impacted by rising oil prices.

• Gasoline and diesel prices 

Average gasoline prices in the U.S. were at $4.08 on Thursday, according to AAA. This was more than $1 higher than they were a month ago when the conflict in Iran had just begun.  Diesel prices were at $5.51 on Thursday. The highest recorded AAA price for diesel was $5.81, set on June 19, 2022.

Diesel is the primary fuel for industrial transportation. It powers public transportation and some cars and light trucks, but also freight and delivery trucks, military vehicles, fishing boats and farm equipment.

Relying on national security as a basis, the Trump administration has been taking steps to increase production, including restarting oil platforms in California against the state policies that seek to eliminate the industry. The administration also voted to exempt oil and gas operations in the Gulf of America from the Endangered Species Act in order to prevent environmental groups from using litigation to further restrict supply.

During a press conference earlier this month, Federal Reserve Chair Jerome Powell touched upon the economic impacts rising diesel prices will have.

“I think it’s a more general concern than that. It’s diesel prices because that’s transportation of food and things like that. There are just lots of ways that oil and derivatives of oil get into the production and transportation of many, many things,” Powell said.

• Fertilizers and food

On top of the rising diesel costs that are a sizable cost to agriculture operations, farmers are also getting hit by rising fertilizer prices.

Nitrogen fertilizer starts out as natural gas, and through the Haber-Bosch process, the gas is converted into ammonia. The ammonia is then made into urea and other nitrogen products. Nearly half of the global exports of urea and 30% of the global exports of ammonia flow through the Strait of Hormuz.

Middle East countries produced 10 million metric tons of ammonia-based fertilizers in 2023, according to the Energy Policy Research Foundation. All of that is virtually at a standstill, as there aren’t really any alternative routes for the products to take.

Farmers were already facing a tough economic environment, but the double hit to their costs from diesel and fertilizer is going to make it hard for many to turn a profit from their crops this year.

This will ultimately impact food prices down the line.

• Plastics and electronics

Plastics are found in everything from packaging to automobiles. The conflict is driving up the cost of feedstocks used to make plastics, including ethane, which is made from natural gas, and naphtha, which is made from crude oil.

Annually, about $20 billion to $25 billion in petrochemical products pass through the Strait of Hormuz, Reuters reported. In 2025, over 40% of polyethylene, a polymer used in packaging, came out of the Middle East. That supply ships to regions outside North America, but like oil, these commodities are traded globally.

Helium is produced in trace amounts as a byproduct of natural gas production. It’s vital to the production of semiconductors, flat-screen televisions and monitors, fiber optic cables and magnetic resonance imaging (MRI). It’s also used in the propulsion of rockets, according to the Energy Research Policy Foundation. Qatar produces 35% of the global supply of helium, behind the U.S., which supplies 44% of the global supply.

The global demand for helium is also being driven up by AI and the 2022 CHIPS and Science Act, which is boosting U.S. domestic semiconductor manufacturing. Global helium demand, according to the Energy Research Policy Foundation, is projected to rise 6% annually through 2030.

With Qatar’s helium supplies cut off from the world, prices have doubled and could surge even higher.

There’s really no consumer product that won’t be impacted by the conflict in Iran. How high prices go and what the impact will be on the greater economy will depend on how long the conflict continues, and its eventual outcome.