US Gasoline Prices Approach $4 per Gallon as Mideast Tensions Disrupt Oil Supply

American drivers are facing a rapid increase in fuel costs, with the national average price for a gallon of gasoline approaching the key psychological threshold of $4 as escalating U.S.-Iran tensions disrupt a vital global oil artery.

Prices Surge on Supply Fears

The national average price of gasoline stood at $3.84 a gallon on Tuesday, an increase of 9.8 cents from just a week ago, according to data from fuel price tracker GasBuddy. This marks a 22.2% increase compared to the same time last year.

The primary driver is the collapse of a truce between Washington and Tehran, which led to the reimposition of a U.S. naval blockade on Iran. This has severely restricted tanker traffic through the Strait of Hormuz, a choke point for about 20% of global oil supplies. Shipping data on Monday showed the number of tankers transiting the strait had fallen to a two-month low.

Analysts are forecasting further increases. "I now expect the national average price of gasoline to reach $4 per gallon in the next 7-10 days, if not sooner," Patrick De Haan, an analyst at GasBuddy, wrote on Monday. He added that the U.S. average diesel price is likely to hit $5 per gallon by the end of the week.

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Inflationary Risks Rekindled

The spike in energy costs threatens to reignite broader inflation just as price pressures had begun to ease. The retreat in energy prices was a key factor in June's better-than-expected inflation data, a narrative that could now be reversed.

"Higher gasoline prices feed into transportation costs, freight rates, and broader logistics expenses, which eventually pass through to the prices of goods and services across the economy," said Simon-Peter Massabni, head of business development at XS.com. The loss of Russian refining capacity due to Ukrainian attacks on energy infrastructure has also contributed to the tighter supply environment.

Mark Zandi, chief economist at Moody’s Analytics, warned that a prolonged closure of the Strait of Hormuz would further deplete already low global oil inventories. In such a scenario, he noted, oil and gasoline prices would spike and could lead to physical supply shortages globally.