Landman, Iran, and the Importance of Oil

How does a war with Iran on the other side of the globe impact prices of oil, gas, and all other goods in the U.S.? Billy Bob Thornton has the answer!

"We have a 120-year petroleum-based infrastructure. Our whole lives depend on it. And hell, it's in everything... tennis rackets and lipstick and refrigerators and antihistamines. Pretty much anything plastic—your cell phone case, artificial heart valves, soap, hand lotion, garbage bags, and fishing boats. You name it, everything."

This line from Billy Bob Thornton's character, Tommy Norris, in the show Landman, highlights the ubiquity of oil in our lives. While you should not get your news or worldview from television, oil and its derivatives indeed play a major role in our lives, whether we like it or not.

Importance of Energy

In recent history, there may be nothing more important to keep our modern world from functioning than energy. In the U.S., 38% of our energy usage comes from oil, according to the U.S. Energy Information Administration (EIA).

Most of this is used in transportation, with a smaller percentage for industrial use, and a negligible amount used elsewhere. That does not mean the impacts are negligible elsewhere. Because nearly all goods require transportation at multiple stages, higher oil prices raise shipping costs throughout the supply chain, which companies eventually pass to consumers.

How Iran Manages Its Oil

You need not look further than Iran itself for a clear example of this effect. Iran has some of the cheapest gasoline prices on the planet. It is over 30 times more expensive in the U.S. than in Iran. While this is mainly due to their oil production, they also do something that may seem surprising. They subsidize their gas prices.

Iran subsidizes their gas prices to lower public unrest and provide economic relief to Iranian citizens. Gas is chosen as the good to subsidize because of cultural expectations, but mainly because gas prices impact everything else. Iran suffers from high inflation, and they try to combat it with these subsidies. If leaders in the country can keep gas prices low, they can slow the increase in price for all other goods.

Oil in the Strait of Hormuz

The Strait of Hormuz is one of the most important oil supply routes in the world. A narrow sea route connects the Indian Ocean to the Persian Gulf, through which 20% of the world's crude oil supply travels. Major oil producers like Iran, Iraq, Saudi Arabia, and several small Gulf states export their oil through this waterway.

While less than 10% of U.S. oil comes from the Persian Gulf, according to the EIA, this does not mean the effect is limited to that percentage. A vast majority of this oil goes to the relatively oil-free areas of Asia, namely China, Japan, India, and South Korea.

Other routes lack the infrastructure to handle the volume of oil produced in this region. This causes oil-importing nations to rely on non-Gulf oil suppliers. Oil is a global commodity, so regional supply disruptions raise prices everywhere.

Oil is also a difficult commodity to quickly increase production. Though some countries can produce more oil, like the U.S., it will be a while before they can fully compensate for the oil lost from the Persian Gulf.

This means other oil-exporting countries must raise prices to meet demand and dip into their oil reserves. This, combined with the previously mentioned impact on the cost of other goods and services, creates a global inflationary effect.

What is Next?

As of the time of writing (March 10, 2026), the upcoming events are hard to predict. As of now, no ships, excluding Russian, Chinese, or Iranian-owned or operated ships, have moved through the Strait of Hormuz since Iran has declared it closed. If only Iranian-allied ships are allowed to pass through the Strait, oil exports would still be severely limited in both volume and destination.

Oil prices hit their highest price since 2022 on March 9, 2026, but just a day later, they had recovered most of the increase since the conflict began a week and a half ago. This seems largely due to the market responding to President Trump's various comments that the war would be over soon. Whether these comments will hold true remains to be seen.

If the current situation does not change, you should expect the Strait of Hormuz closure to push oil prices higher. This will lead to higher gasoline prices and, eventually, higher prices across other goods, creating an inflationary effect.

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