RESOLVING THE LEDGER
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0 Share Newsweek is a Trust Project member See more of our trusted coverage when you search. Prefer Newsweek on Google to see more of our trusted coverage when you search. Gas prices have again climbed above $4 per gallon amid stalled efforts to bring the Iran conflict to a close, and a confluence of other supply-side risks are threatening to compound the issue and its political risks for the Republican Party ahead of this year's elections.
The war in Iran has for months effectively blocked off the Strait of Hormuz, constraining Middle Eastern output and putting upward pressure on fuel costs in the U.S. While these recovered following an announced agreement between the warring sides, this has reversed due to a breakdown in negotiations and the repeated exchange of strikes in the region.
"The Strait of Hormuz remains the most important factor behind the increase in oil and therefore gasoline prices," Carole Nakhle, CEO and founder of the energy consultancy Crystol Energy, told Newsweek. "The disruption is real, but prices are also responding almost daily to changing expectations about diplomacy and the duration of the conflict."
However, Nakhle said that, even outside the war, global and domestic developments threaten to keep drivers’ costs elevated in the near-term.
According to AAA, the nationwide average price for regular unleaded stood at $4.04 on Wednesday, up from $3.88 a month prior and under $3 before the war began on February 28.
California currently boasts the highest price of $5.58 per gallon, followed by Hawaii ($5.54) and Washington state ($5.15).
As analysts previously told Newsweek , the West Coast was at greatest risk from a Middle Eastern supply disruption, given the outsized reliance on the region’s imports and the closure of refineries in recent years. California also has the highest combined sales and excise taxes on fuel , a fact that President Donald Trump has noted when pressuring gas retailers to lower their prices .
On the other end, Indiana continues to have the lowest prices in the nation at $3.52 per gallon, followed by Texas ($3.56) and Louisiana ($3.57).
The Iran war remains the main source of volatility in global oil markets and domestic fuel costs, analysts tell Newsweek, with prices swinging based on disruptions or progress in Hormuz traffic and developments in U.S.-Iran negotiations.
Prices have climbed this week and continue to hover at around $90 a barrel amid renewed violence in the region and fading hopes of a diplomatic breakthrough, though some remain optimistic.
Khawaja Asif, the defense minister of Pakistan—which has served as the principal mediator in the conflict—told Bloomberg on Tuesday that the pair were approaching "some sort of arrangement" and that things were "shaping up again in favor of a peace arrangement or a deal."
"A credible agreement allowing more normal passage through Hormuz, an improvement in physical flows, or convincing progress toward a broader diplomatic settlement could remove some of the pressure quite quickly," Nakhle told Newsweek. "Conversely, prolonged disruption, further attacks on energy infrastructure or disruption to alternative export routes would create upside risk."
However, Nakhle said that "several risks" beyond the war "are now overlapping" and threatening to keep upward pressure on U.S. gas prices.
Data released by the Department of Energy on Monday revealed that the Strategic Petroleum Reserve (SPR)—the government’s principal crude oil stockpile and buffer—had fallen to under 300 million barrels for the first time since early 1983, when it was in the initial filling period. This comes after President Donald Trump ordered the release of 172 million barrels in March to help curb rising oil prices.
"A smaller reserve does not automatically make today's barrel of oil more expensive," Nakhle said of the drawdown, "but it leaves the U.S. with a smaller buffer with which to respond to an additional or prolonged supply disruption."
Bob McNally, president of the D.C.-based consultancy Rapidan Energy Group, likewise told Newsweek that, while declining SPR levels are not yet contributing to high prices, "if the Hormuz disruption is prolonged or more disruptions occur, the lack of an SPR buffer will lead to higher prices in the future."
McNally also noted recent damage to Russian refineries from Ukrainian attacks, which have further strained global supplies. Kyiv has ramped up strikes on Moscow’s energy infrastructure to limit their means of funding the war, which experts say could put further upward pressure on prices.
"The Russia/Ukraine war is getting mostly ignored but it is the huge driver of global diesel and gasoline prices," Thomas Kloza, the chief energy adviser for Gulf Oil, told Newsweek.
The confluence of supply challenges and elevated prices poses a political risk for Republicans in the run-up to this year’s elections, with polls continuing to show voter frustration over gasoline costs and a tendency to blame the administration.
"For this specific midterm election, the crucial issue will certainly be high inflation perceived from the cost of gas, which has again increased substantially all over the country, and whose increase can be very directly attributed to a foreign policy decision by the Trump administration [the decision to launch the U.S. military campaign against Iran on February 28, 2026, despite warnings that Iranian retaliation could close or severely disrupt the Strait of Hormuz]," Francesco D'Acunto, an associate professor of finance at Georgetown University, told Newsweek .
He added that concluding the conflict in a way that would fully reopen the Strait of Hormuz is likely the "most important and fruitful action the Trump administration can still obtain to get to the midterm election with voters who are less frustrated about inflation and gas prices."
A Harris Poll from early July found that 95 percent of Americans now believe the U.S. is in an affordability "crisis"...
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