ANN ARBOR — Michigan drivers may not feel it immediately, but the latest flare-up in Middle East fighting has once again put gasoline prices—and much of Michigan’s economy—on an upward path.

Oil prices jumped this week after renewed fighting between the United States and Iran reignited concerns that shipping through the Strait of Hormuz, one of the world’s most important oil transit routes, could again be disrupted. Although crude prices later surrendered part of those gains, energy markets remain on edge as investors weigh the risk of further escalation.

For Michigan, the concern extends well beyond higher gasoline prices.

Higher fuel costs ripple through the state’s manufacturing base, trucking industry, airlines, tourism sector and, perhaps most importantly, its automotive industry.

Patrick De Haan, head of petroleum analysis at GasBuddy, said motorists shouldn’t expect gasoline prices to jump overnight because retail stations are still selling fuel purchased days earlier.

“Gasoline prices typically lag movements in crude oil,” De Haan said. “If oil remains elevated, motorists should expect higher prices at the pump over the coming days.”

AAA reported Michigan’s average price for regular gasoline at about $3.93 per gallon Thursday, already above the national average. If crude oil continues climbing, analysts say Michigan drivers could see additional increases in the days ahead.

War Premium Returns

Patrick Anderson, CEO of the Anderson Economic Group, said the renewed fighting has brought back the geopolitical uncertainty that energy markets briefly thought had subsided.

“The Iran war went from hot to cold, and is now back to hot again,” Anderson said. “Nobody knows how long this will last, but there is no evidence that the warring parties are in agreement on how and when oil tankers can transit the Gulf of Hormuz.”

That uncertainty alone is enough to move markets.

Oil traders don’t need to see actual supply disruptions before prices rise. The possibility that commercial shipping could be interrupted through the Strait of Hormuz often causes investors to bid crude prices higher, creating what energy analysts call a “war premium.”

Anderson said recent attacks underscore that risk.

“Iran has again fired on tankers, and the U.S. has retaliated,” he said. “That means oil prices are going to go up, and indeed they already have.”

Energy Independence Softens The Blow

Unlike previous Middle East conflicts, Anderson said the United States enters this latest crisis in a much stronger energy position.

“We in the United States are very fortunate that the country made tremendous progress toward becoming energy independent over the past several years,” he said. “We now drill and refine enough petroleum to satisfy most of our needs. Even though oil prices are up worldwide, they are not up nearly as much for Americans.”

That doesn’t mean Michigan escapes the impact.

Even modest increases in gasoline and diesel prices can raise transportation costs throughout the economy, increasing expenses for manufacturers, retailers, contractors, delivery companies and consumers.

For families planning summer vacations, higher fuel prices mean less money available for restaurants, hotels, entertainment and shopping. Businesses that depend on transportation often face difficult choices between absorbing higher costs or passing them along to customers.

Auto Industry Faces Double Whammy

Michigan’s signature industry could be among the hardest hit if higher oil prices persist.

“The auto industry is doubly vulnerable here,” Anderson said. “First, the price of oil makes people nervous about buying cars. Second, few industries need as much energy as the auto industry. It uses energy to make parts, then to truck the parts to assembly plants, and then to truck the completed vehicles to dealers. Higher oil prices are a double whammy to Southeast Michigan.”

The state’s network of automotive suppliers relies on just-in-time manufacturing, where parts arrive only hours before they are needed on assembly lines. Rising diesel prices increase freight costs while higher energy prices also raise manufacturing expenses inside factories.

Airlines serving Detroit Metropolitan Airport also could eventually face higher jet fuel costs if crude oil remains elevated, potentially putting upward pressure on airfares later this summer.

What Michigan Consumers Should Watch

Whether gasoline prices continue climbing will depend largely on developments in the Middle East over the next several weeks.

Energy analysts will be watching:

  • Whether fighting expands beyond current military operations.
  • Whether commercial shipping through the Strait of Hormuz remains uninterrupted.
  • Global crude oil prices.
  • U.S. gasoline and diesel inventories.
  • Refinery production levels.

The encouraging news is that energy markets are not yet pricing in a prolonged disruption of global oil supplies. But this week’s sharp swings in crude oil demonstrate how quickly geopolitical events can affect consumers thousands of miles away.

For Michigan drivers and businesses, the lesson is familiar: the risk everyone hoped had faded has returned.

Whether it becomes another short-lived market scare or a sustained increase in fuel prices now depends largely on events unfolding in one of the world’s most strategically important energy corridors.