Get ready for $5-a-gallon gasoline

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The oil-price gains are the products of four forces: 

Middle East tensions. Iran and others are threatening a number of retaliatory measures, possibly shutting down the Strait of Hormuz in the Persian Gulf to tankers heading out out to Europe and elsewhere. Iran's interest is retaliation against Israel and the U.S. after an Israeli attack on Iran's embassy in Damascus, Syria, killed two Iranian generals.

Global supply disruptions. Russian oil refineries have been hit by Ukrainian drone attacks. Houthi attacks on ships moving in and out of the Red Sea have slowed shipping generally and oil shipments in particular to Europe and Asia. In some cases, shipping companies have routed their vessels all the way around Africa.  

OPEC and friends want higher prices. Members of the Organization of Petroleum Exporting Countries and the OPEC+ countries are trimming output to push prices higher. They will probably leave production cuts in place when the cartel meets in June.

More demand for gasoline and other products. Increased demand reflects continued economic growth in the Americas and more demand in both Europe and China, says Tom Kloza, global head of energy analysis at Oil Price Information Service.

Blocking the Strait of Hormuz: 'A show stopper'
Closing down the Strait of Hormuz would cause crude oil prices to jump by $40 a barrel, Robert McNally, founder of Rapidan Energy Group, has said in multiple interviews in the last week. "It would be a show stopper," he told Bloomberg.

That's show stopper as in recession. How severe is anyone's guess.

The big question is whether Iran and Hezbollah, the Iran-backed group, really want to do something that would hurt not just Israel and the U.S. but everyone in the Persian Gulf region.

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