Gas prices top $4 as US-Iran fighting escalates

U.S. gasoline prices have climbed back above $4 a gallon as renewed fighting between the United States and Iran rattles oil markets and raises fears over shipping through the Strait of Hormuz.

The national average for a gallon of regular gas reached $4.003 on Monday, the first time in more than a month it has crossed that threshold, according to AAA data cited by CBS News. Al Jazeera, also citing AAA, reported that the average topped $4 after rising from $3.87 a week earlier, marking a second straight week of increases.

Diesel is also rising. The national average reached $5.11 a gallon Monday, CBS News reported. Diesel prices can affect the cost of groceries and other goods because many products are transported by truck.

The latest increase follows a renewed escalation in the U.S.-Iran conflict. CBS News reported that gas prices began rising after the war in Iran started on Feb. 28, reaching a recent high of $4.56 in May before easing as negotiations advanced and the two sides reached an interim deal in June. Prices are now moving higher again as fighting intensifies and the two countries compete for control of the Strait of Hormuz.

Oil prices, a major factor in pump prices, have also moved sharply. CBS News reported that Brent crude, the international benchmark, rose 3.2% to $90.95 a barrel Monday, while benchmark U.S. crude climbed 2.8% to $84.04. Al Jazeera reported that Brent hit $91.42 on Sunday before slipping 0.1% Monday to $88.04, and that U.S. West Texas Intermediate reached $85.39, its highest level since June 12, before easing 2 cents, or 0.2%, to $82.29.

The Strait of Hormuz remains central to market concerns. Al Jazeera reported that the waterway carried roughly 20% of the world’s oil supply before the war. The outlet said the breakdown of the U.S.-Iran ceasefire drove up prices amid concerns about tanker traffic, and that those concerns were compounded by pressure from Iran on its Houthi allies in Yemen to close the Red Sea shipping route if U.S. attacks on Iranian energy infrastructure continue. Yemen’s Houthis have also announced a naval blockade against Saudi Arabia, Al Jazeera reported.

Shipping through the Strait of Hormuz has slowed. Between July 17 and 19, only 30 vessels passed through the waterway, according to Kpler data cited by Al Jazeera. LSEG data cited by the outlet showed traffic was even more limited over the weekend, with eight ships transiting Saturday and four on Sunday.

The tensions are also hitting shipping companies. Greece’s Dynacom Tankers said two projectiles struck two of its ships while they were sailing near the Omani coast, Al Jazeera reported. The company did not identify who fired them.

“Higher energy prices remain in focus as a re-escalation in the Middle East tensions adds to concerns that last week’s cooler-than-expected inflationary data may not be enough to deter the Fed from raising interest rates later this year,” David Meger, director of metals trading at High Ridge Futures, told Reuters, according to Al Jazeera.

The price increase comes after last week’s inflation report showed a temporary decline in consumer prices, Al Jazeera reported. The Consumer Price Index fell 0.4% on a monthly basis, driven by a 9.5% drop in gasoline prices, according to the Department of Labor’s Bureau of Labor Statistics. Al Jazeera said that data reflected a short-lived easing in U.S.-Iran tensions before fighting intensified again.

Higher fuel costs could become a political issue as the U.S. midterm elections approach. CBS News reported that a Gallup poll released last month found two-thirds of Americans said fuel costs had caused financial hardship for their household.