Concerns over rising fuel prices resurfaced Wednesday as the fragile truce between Iran and the United States showed signs of unraveling. President Donald Trump declared the U.S. ceasefire with Iran over following Iranian attacks on commercial ships in the Strait of Hormuz and on American military sites in other Gulf nations, prompting a rise in oil prices to their highest point in weeks.
The market reacted swiftly to the renewed geopolitical risk, with oil prices climbing due to the perception that sustained fighting could disrupt tanker traffic through the Strait of Hormuz, a critical route for global oil flows. Crude oil prices directly influence gasoline prices, though consumers may experience a delay of several weeks before feeling the full impact due to refiners purchasing oil in advance and the subsequent distribution process.
U.S. gasoline prices saw a slight increase to an average of $3.80 per gallon for regular fuel on Wednesday, up from $3.79 the previous day, but remained significantly below the month-ago average of $4.16, according to AAA. The price of a barrel of U.S. benchmark crude reached $75.80, its highest in over two weeks, while Brent crude neared $79 per barrel.
In an effort to mitigate high oil prices during previous tensions, the U.S. and other nations released oil from strategic reserves starting in March. However, these reserves are finite. As of July 3, the U.S. Strategic Petroleum Reserve held 319.5 million barrels, a level not seen since the reserve was initially being filled in 1983, limiting the U.S.'s capacity to intervene.
The International Maritime Organization condemned the attacks on ships in the Strait of Hormuz. Secretary-General Arsenio Dominguez urged flag states, shipowners, and operators to avoid exposing seafarers to unnecessary danger by transiting the strait as long as their safety could not be assured. The situation in the region was described as volatile.
Data from Kpler indicated that some traffic continued to traverse the strait, with 41 crossings verified on Tuesday compared to 36 on Monday, though it remained unclear if these occurred before or after the reported strikes. Some vessels have resorted to transmitting their locations less frequently to navigate the strait, complicating accurate counts. Ships have been utilizing alternative routes, including a northern route through Iranian waters and a southern route through Omani waters, with the struck vessels reportedly using the latter.
Economists suggest that the recent developments might be a temporary setback rather than a complete breakdown of the truce. While Trump characterized negotiations with Iran as a "waste of time," he also indicated that U.S. negotiators would continue talks, suggesting the possibility of de-escalation and preventing a return to full-scale conflict.
These renewed doubts about the Strait of Hormuz emerged as two major shipping companies, Maersk and Hapag-Lloyd, had recently announced plans to resume services in the Suez Canal, which had been paused due to attacks in the Red Sea. The recent stability in the Middle East had facilitated this decision, but the current deterioration in the Persian Gulf could jeopardize this resumption. Hapag-Lloyd stated that contingency plans are in place should the security situation change or deteriorate.