Iran War Drives Up Gas Prices, OECD Warns Against Broad Relief Measures

The ongoing conflict in Iran is significantly impacting global energy markets, leading to rising gasoline prices for consumers. Although governments are considering relief measures, the Organisation for Economic Co-operation and Development (OECD) cautions against widespread subsidies, advocating for targeted support for vulnerable households and accelerated investment in renewable energy sources.

Gasoline Prices Surge Amidst Iran War

Fuel prices have been steadily increasing since the outbreak of the Iran war approximately three weeks ago. In the United States, the average gasoline price hit $3.59 a gallon on March 11, 2026 [1]. As of March 16, 2026, U.S. Gasoline prices averaged $3.718 a gallon, an increase of nearly 80 cents from the previous month [3]. Diesel prices have similarly risen sharply, reaching just under $5 a gallon, $1.34 higher than last month [3]. Globally, crude oil prices spiked to nearly $120 a barrel shortly after the war began before settling around $100, a significant increase from pre-war levels of around $70 a barrel [3].

OECD Advises Against Broad-Based Subsidies

The OECD advises against measures like fuel discounts or increased commuter allowances, citing the substantial cost to government finances. Increased defense spending, infrastructure investment needs and rising healthcare and pension costs already place a heavy burden on government budgets [4]. Instead, the organization recommends focusing support on lower-income households, who are disproportionately affected by rising energy prices [4]. Any aid should be temporary and designed to maintain incentives for energy conservation.

Disruptions to Oil Supply

The Iran war is restricting shipments of oil, particularly from Saudi Arabia and Iraq, through the Strait of Hormuz, a crucial waterway for global energy transport [2]. Approximately 20% of the world’s oil shipments and 20% of seaborne liquified natural gas pass through this strait [2]. The conflict has also resulted in damage to oil infrastructure and reduced ship traffic through the region [3].

Long-Term Solutions: Renewable Energy and Tax Adjustments

To reduce dependence on energy imports, the OECD emphasizes the need to accelerate the expansion of renewable energy sources, such as wind and solar power, and to improve energy grid infrastructure [4]. This includes phasing out tax breaks and subsidies for fossil fuels to develop renewable energy and electric vehicles more attractive. The German Finance Ministry is considering an excess profits tax on oil companies, with potential revenue used to fund targeted relief for commuters [4].

Looking Ahead

As the Iran war continues, upward pressure on fuel prices is likely to persist until oil flows through the Strait of Hormuz are restored [3]. Governments face the challenge of balancing the need to support consumers with the importance of promoting energy conservation and investing in long-term sustainable energy solutions.