JUANA SUMMERS, HOST:
The U.S. attacks on Iran and that country's retaliatory strikes on its neighbors are disrupting energy traffic in the Middle East, and the effects of that are being felt around the world. Here in the States, gasoline prices jumped overnight while prices in the stock market fell. NPR's Scott Horsley joins us now. Hi.
SCOTT HORSLEY, BYLINE: Hi, Juana.
SUMMERS: So Scott, let's talk about the economic fallout of the war so far. Sounds like we should start with oil.
HORSLEY: Yes. This war is being fought in a critical crossroads of the global oil market. Ordinarily, Iran itself exports more than a million barrels of oil each day, but 20 times that much oil typically moves through the narrow Strait of Hormuz just south of Iran every day. And right now, that supply has pretty much been choked off. Crude oil prices have jumped sharply in the last couple of days, and energy analyst John Kilduff of Again Capital says that is going to show up at the gas pump.
JOHN KILDUFF: If crude oil is the flour, gasoline's the cake, and the price of flour is going up by a lot. Consumers are going to be feeling this before they know it.
HORSLEY: AAA says the average price of gas jumped 11 cents overnight. That's the biggest one-day increase since Russia invaded Ukraine back in 2022.
SUMMERS: And how does the price jump like that one affect the broader economy?
HORSLEY: You know, for most of the last year, we've been enjoying low gas prices, and that has been a counterweight to inflation. But gas prices are now back above $3 a gallon for the first time in three months, and Kilduff says the more people have to spend on gasoline, the less they'll have to spend on everything else.
KILDUFF: It's like an immediate, unwanted tax hike because it's going to pinch discretionary spending in other places. So it's never good. It's inflationary. It undermines consumer confidence.
HORSLEY: Now, the U.S. is more insulated from global oil shocks than it used to be because we produce a lot of oil here at home. But oil is a global commodity, so when supplies are disrupted anywhere, that does affect prices everywhere.
SUMMERS: And Scott, I understand that natural gas prices have also jumped. How does that relate to the rest of this?
HORSLEY: Yeah. Well, in addition to the fears in the Strait of Hormuz, Qatar, which is a major producer of liquid natural gas, has shuttered its facilities because of the war, and that has triggered a huge spike in natural gas prices in Europe, which is heavily dependent on LNG to replace the gas that it used to buy from Russia. Mona Mahajan, who heads strategy at the investment manager Edward Jones, says the economic fallout from the war and the resulting energy shocks is generally hitting countries in Europe and Asia harder than it's hitting us here in the U.S.
MONA MAHAJAN: The U.S. has become more energy independent. We're a net producer. And in fact, energy as a percent of our GDP has declined and diminished pretty substantially because we've gotten more efficient at using energy as well.
HORSLEY: But even before this war started, natural gas prices in the U.S. were up nearly 10% from a year ago. That affects heating bills because nearly half of all homes are heated with natural gas, and of course, the higher prices have been compounded by cold weather in much of the country. My own gas bill was more than $300 last month, which is the highest it's ever been. As the weather warms up, heating bills won't be such a big factor, but natural gas is also used to generate a lot of electricity, so that's going to pinch when people start to use their air conditioners, and electricity prices were already climbing more than twice as fast as overall inflation.
SUMMERS: Scott, before I let you go, one more thing - how did the stock market react today?
HORSLEY: Well, the Dow Jones Industrial average ended the day down about 390 points, but that actually signals that investors were calming down a little bit because in the first hour of trading this morning, the Dow was down more than a thousand points.
SUMMERS: NPR's Scott Horsley, thank you.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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