Iran conflict pushes U.S. gas prices to near 4-year high before Memorial Day

• Gasoline prices have increased over 50% since the conflict began and could hit $5 per gallon in June if the Strait of Hormuz remains closed, with full normalization not expected until well into 2027.
• Diesel prices are projected to reach $6 to $7 per gallon due to global competition as Asian and European countries compete for U.S. refined product exports following the loss of Middle Eastern supplies.
• U.S. fuel inventories are declining rapidly with only four to six weeks of buffer remaining, though the country is insulated from physical shortages due to domestic production and strategic reserves.

Summary: U.S. Gas Prices Near 4-Year High Amid Iran Conflict

Key Developments:

U.S. gasoline prices reached $4.55 per gallon on Friday before Memorial Day weekend, marking a 50%+ increase since the U.S.-Israel conflict with Iran began on February 28. This represents the highest pre-Memorial Day pricing since 2022, following Russia's Ukraine invasion.

Critical Supply Issue:

Iran's blockade of the Strait of Hormuz—the world's most important oil export route—has driven crude oil prices up over 40% from pre-war levels. The strait's closure has triggered what analysts describe as historic supply disruptions affecting major Persian Gulf producers.

Price Outlook:

Analysts warn gasoline could hit $5 per gallon in June if the Strait of Hormuz remains closed. Diesel prices face even steeper increases, potentially reaching $6-$7 per gallon due to global competition for U.S. refined product exports. Patrick De Haan of GasBuddy indicates prices may not normalize until well into 2027, even with Hormuz reopening.

Market Dynamics:

While the U.S. faces no physical fuel shortages due to domestic production and strategic reserves, Asian and European buyers are competing aggressively for U.S. refined products, pushing domestic prices higher. U.S. oil inventories are depleting rapidly, with only 4-6 weeks of buffers remaining before significant price spikes in gasoline, diesel, and jet fuel.

Political Context:

Oil prices fell nearly 7% this week after President Trump suggested willingness to negotiate, though previous diplomatic signals have proven unreliable. Trump stated he's not considering Americans' financial situation while prioritizing preventing Iran from obtaining nuclear weapons.