Average gasoline prices in the United States have surpassed $4 per gallon, reaching $4.003 on Monday, according to AAA data. This increase, a jump of 13 cents or 3% over the past week, is attributed to the escalation of conflict with Iran and renewed fears of a global oil shortage.
The current price point mirrors levels seen shortly after the Iran conflict began in late February. That conflict previously led to Iran's closure of the Strait of Hormuz, a critical maritime route responsible for transporting approximately one-fifth of global oil supply, which sent gasoline prices surging.
Prices at the pump had temporarily fallen below $4 a gallon last month following a preliminary agreement between the U.S. and Iran aimed at ending the war. Prior to the Iran conflict, fuel costs last exceeded $4 per gallon in August 2022, following Russia's invasion of Ukraine.
Recent exchanges of strikes between the U.S. and Iran have reignited large-scale fighting and diminished hopes for a resolution. President Donald Trump stated Sunday that the U.S. had struck Iran "hard" in response to the deaths of U.S. service members over the weekend.
U.S. Central Command reported that two service members were killed in an attack in Jordan on Friday, with a third service member still missing. Another service member was killed in Iraq on Saturday, CENTCOM confirmed. The U.S. also resumed its naval blockade of the Strait of Hormuz last week, reversing a key commitment from the earlier agreement. This action followed Iranian attacks on oil tankers transiting the strait.
The Iran conflict had previously caused one of the largest oil shocks on record, driving the national average price of gasoline as high as $4.56 per gallon on May 21, according to AAA. Oil and gasoline prices began to decline in late May as diplomatic efforts between Iran and the U.S. suggested a potential reopening of the strait. By late June, prices had fallen to their lowest point since before the conflict began.
The easing of gas prices contributed to a broader decrease in inflation. Federal government data released Tuesday showed that inflation dropped more than anticipated in June as fuel costs decreased. Gas prices rose 3.5% in June compared to the previous year, a decrease from the 4.2% year-over-year inflation rate recorded in May. While the June figure represented the lowest inflation rate since March, the pace of price increases remains more than a percentage point higher than the pre-conflict level. Even with the recent decline, overall inflation remains significantly above the Federal Reserve's target rate of 2%.