Oil prices pushed higher and U.S. pump prices set records over the weekend after the United States and Iran traded strikes on oil tankers in the Gulf, deepening a rally that has already made this the most expensive Labor Day at the pump on record for American drivers.
Brent crude traded near $97 a barrel Monday, roughly 45 percent above where it stood a year ago, as markets weighed the risk of prolonged disruption to energy flows from the region, according to market tracking of the conflict. Diesel hit an all-time high of $5.85 a gallon on Sunday, while the national average for regular gasoline reached $4.14 — the highest ever recorded for the Labor Day holiday, surpassing the previous record of $3.82 set in 2012. The American Automobile Association had forecast a record 34.1 million Americans would travel at least 50 miles from home over the weekend, with 28.7 million driving, itself a record figure.
Tankers become targets
The latest escalation came after U.S. forces struck and "permanently disabled" three Iranian oil tankers over the weekend — identified in Iranian accounts as the Downy, Stark 1 and Kylo — in response to Iranian ballistic missile attacks on U.S. Navy vessels. Iran's Revolutionary Guard retaliated by targeting six vessels it said were linked to the United States. Mohsen Rezaei, secretary of Iran's Supreme National Security Council, said Sunday that Iran would establish a new "restricted" zone beyond the Strait of Hormuz within days, with any vessel entering it to be added to an Iranian sanctions list, according to the announcement. Rezaei also claimed the strait itself was "completely closed" under Iranian forces' control, a characterization the Trump administration disputes. Iran's parliament speaker, Mohammad Bagher Ghalibaf, issued a starker warning after Saturday's tanker strikes:
Any aggression against Iran's interests will receive a faster, more intense and more painful response.
Mohammad Bagher Ghalibaf, speaker of Iran's parliament
Traffic through the Strait of Hormuz, which carries roughly a fifth of the world's oil consumption, has fallen to about 102 weekly transits from more than 130 before the conflict began. A coordinated release of strategic petroleum reserves by consuming nations, along with U.S. efforts to help facilitate alternative Russian and Iranian oil sales elsewhere, have so far failed to slow the rally, traders say.
The Trump administration has downplayed the scope of the fighting even as it roils energy markets: the president has described the conflict as "small potatoes," while Vice President JD Vance said negotiations with Tehran would not resume until attacks on shipping stop, adding that he "wouldn't call it a war." With no resolution in sight and both sides signaling further retaliation, traders are bracing for prices — and prices at the pump — to keep climbing into the autumn driving season.
