US Gasoline Tops $4/Gallon as Strait of Hormuz Disruptions Fuel Supply Concerns

U.S. retail gasoline prices rose above $4 per gallon on Monday, reaching a national average of $4.0030 per gallon, according to data from AAA. The level marks the highest national average since late March, when geopolitical tensions also affected shipping through the Strait of Hormuz.

Several factors have contributed to the recent increase in fuel prices:

1. Renewed hostilities between the United States and Iran in early July followed the collapse of a previously announced memorandum of understanding.
2. Brent crude oil has risen by roughly 16% over the past week, trading near $88.29 per barrel.
3. The national average gasoline price has increased by more than 30% since late February.
4. Around 20% of global oil supply normally passes through the Strait of Hormuz, where recent geopolitical tensions have raised concerns about shipping disruptions.

Additional supply-side factors have also supported higher prices.

Russian refining capacity has reportedly been affected by continued Ukrainian strikes on energy infrastructure. Meanwhile, U.S. gasoline inventories stood at 210.5 million barrels, approximately 1.5 million barrels below the five-year seasonal average, according to U.S. government data.

Market implications

Higher fuel prices could contribute to upward pressure on headline U.S. inflation ahead of the Federal Reserve's July 29 policy meeting. Inflation expectations are among the factors monitored by financial markets when assessing the outlook for monetary policy and broader risk sentiment.

Crude oil prices are also widely followed as an indicator of conditions in global energy markets because changes in crude prices typically influence refining costs and retail fuel prices over time.

Elevated gasoline prices have also become an important political issue in the United States ahead of the November midterm elections.