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California could be staring down the barrel of $10-a-gallon gasoline, and the reason isn't just local politics or regulations—it's the potential fallout of a conflict in the Middle East. Historically, the region has been a flashpoint for disruptions in global oil markets, but today, the risks are even greater. The Persian Gulf, particularly the Strait of Hormuz, is one of the most critical chokepoints for global oil exports, with roughly 20 million barrels of crude passing through it every day. If this flow is interrupted, the repercussions could be catastrophic for oil-dependent regions like California.

The core of the issue lies in rising tensions between Iran and Saudi Arabia, two of the largest oil producers in the region. The possibility of an outright military conflict between these nations has grown significantly, particularly in the wake of recent missile attacks by Iran targeting Israel. If Israel retaliates by targeting Iran’s oil infrastructure, such as the critical loading facilities on Kharg Island, Iran’s oil exports could be effectively shut down. This would be a major blow, not just to Iran, but to global oil supplies, as it would cut off a significant portion of the region’s output.

But the situation gets even more complicated. In response to an attack on its oil facilities, Iran might feel it has little to lose and could launch a broader military campaign against Saudi Arabia. This could involve a direct assault or the use of its considerable missile arsenal to target Saudi oil fields, pipelines, and export terminals. Saudi Arabia, which produces about 10 million barrels of oil per day, has some infrastructure that bypasses the Strait of Hormuz, but this wouldn't protect all of its production. Iran could also target Iraq and Kuwait, both of which are significant oil producers, adding further strain to global oil supplies.

In a worst-case scenario, a conflict in the region could disrupt up to 20 million barrels of crude oil daily, sending oil prices skyrocketing. If you think $100 or $120 per barrel is high, imagine prices soaring above $300. Such an extreme spike in prices would ripple through the global economy, triggering inflation and a potential worldwide recession.

Here’s where things get interesting for the U.S.: Unlike in past oil shocks, America is now one of the world’s top oil producers, thanks to the shale revolution. The U.S. could technically insulate itself from the worst of the crisis by halting oil exports and keeping domestic supplies onshore. Legislation passed in 2015 grants the president the authority to cut off crude oil exports if prices spike, which would stabilize prices within the U.S. to some degree. This could keep domestic prices at a more manageable $60 to $70 per barrel, sparing most Americans from the worst of the global price surge.

However, California is an outlier in this scenario. The state, despite being a major oil producer in the past, hasn’t benefited from the shale boom like other parts of the country. Due to regulatory restrictions and environmental concerns, California doesn’t have the same lev