Gas Prices in the U.S. Exceed $4 per Gallon Due to Middle East Conflict

On July 20, average retail gasoline prices in the U.S. surpassed $4 per gallon (or $1.06 per liter) for the first time in a month. Since the onset of military actions by the U.S. and Israel against Iran in late February, fuel costs in the country have risen by more than 30%. The price increase is linked to the resumption of conflict disrupting the stability of energy supplies through the Strait of Hormuz, which transports about 20% of the world's oil. The breakdown of the ceasefire between Washington and Tehran in early July led to a spike in oil prices, increasing production costs for fuel. Alex Hodis, director of brokerage firm StoneX, noted that gasoline will contribute to inflation with further disruptions in the Strait of Hormuz. At the end of March, prices also reached $4 per gallon after Iran halted shipping. In June, prices decreased due to a memorandum to cease hostilities, but fighting has resumed. Additional factors contributing to rising prices include the loss of Russian refining capacity due to attacks by Ukrainian drones and low domestic fuel inventories in the U.S. According to government data, U.S. fuel inventories last week stood at 210.5 million barrels, which is 1.5 million barrels below the five-year average. The situation at gas stations poses political risks for U.S. President Donald Trump and the Republican Party.

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