Average retail price of gasoline in the U.S. surpassed $4 a gallon for the first time in more than three years on Monday, data from price tracking services GasBuddy showed, as the U.S.-Israeli war with Iran continued to roil global energy markets.
The $4-per-gallon milestone was last reached in August 2022, following Russia's invasion of Ukraine, and represents what some analysts have called a psychological barrier for consumers.
Prices for many goods are climbing, including oil used to make gasoline, following Iran's essential closure of the Strait of Hormuz, a key trade chokepoint.
Surging fuel prices have started to weigh on U.S. household finances, which were already grappling with rising costs.
They have also become a political headache for President Donald Trump and his Republican Party ahead of the November midterm elections, as they campaign to hold onto thin majorities in the U.S. Congress.
Trump had vowed to lower energy prices and ramp up U.S. oil and gas production. But so far, much of his second term has been marked by volatile markets, geopolitical turmoil and shifting policies on issues such as tariffs.
U.S. national average retail gasoline prices have climbed about $1.06 a gallon, or 36%, since the U.S. and Israel attacked Iran at the end of February.
"A sudden outbreak of war leads to a spike in U.S. gasoline to $4.00 per gallon. That describes the current Iran conflict – and also Russia’s invasion of Ukraine in 2022. Then, as now, oil prices soared around the world, and emergency oil stockpiles were tapped. But we envision this crisis being shorter: whereas gas stayed above $4.00 for 23 weeks in 2022, we expect prices starting to cool in the next few weeks," said Raymond James analyst Pavel Molchanov.
Still, pump prices could climb further if crude oil prices continue to surge.
U.S. oil futures have surged since the war began, settling at $102.88 a barrel on Monday, up $3.24. They jumped over $3 in Asian trading after Kuwait said an oil tanker was attacked at a Dubai port.
The Trump administration has taken steps to assuage the rise in energy prices as the war has dragged on, including a 60-day waiver of the Jones Act shipping law.
The waiver temporarily allows foreign-flagged vessels to move fuel, fertilizer and other goods between U.S. ports.
Industry insiders expect it to have only a marginal impact on price increases.
High gasoline prices are already squeezing U.S. household finances. Some 55% of respondents in a Reuters/Ipsos poll said their household finances had taken at least "somewhat" of a toll from the increases in gas prices. Among those seeing an impact, 21% said their finances were affected "a great deal."
"The key issue is not simply crude oil itself. It is gasoline, the most visible price in the economy for consumers, and when that price jumps it hits psychology immediately," Jeremy Siegel, economist at WisdomTree, said in a note.
"That matters, even if the broader economic effect is more balanced than the headlines."
