Gas prices fall below $4 per gallon as oil supply fears ease after Iran deal

• Prices remain 30% higher than before the U.S. and Israel attacked Iran on Feb. 28, after which Tehran effectively closed the Strait of Hormuz by attacking commercial ships
• The Hormuz closure triggered the biggest oil supply disruption in history, affecting about 20% of global oil supplies that previously passed through the strait
• The U.S. Navy has been assisting oil tankers through Hormuz since early May, though it remains unclear when traffic will return to prewar levels

Summary

U.S. gasoline prices dropped below $4 per gallon on Thursday, falling to $3.99 on average—the first time below this threshold since March 30. This decline follows a 28-day consecutive drop from a peak of $4.56 on May 21, marking the longest sustained price decline since November 2023.

Key Drivers:

The price reduction stems from easing oil supply concerns following President Trump's signing of a deal with Iran. The agreement is expected to increase oil exports through the Strait of Hormuz, a critical shipping channel that was effectively closed after Tehran retaliated against U.S. and Israeli attacks on Iran on February 28. Iran blocked the strait by targeting commercial vessels, triggering what the article describes as the largest oil supply disruption in history.

Market Context:

• Approximately 20% of global oil supplies previously transitioned through Hormuz before the conflict
• Despite recent declines, gas prices remain 30% higher than pre-conflict levels (before February 28)
• President Trump had signaled a deal was forthcoming for weeks, helping to stabilize oil price expectations
• The U.S. Navy has been escorting oil tankers through Hormuz since early May

Outlook:

While the U.S.-Iran agreement should gradually restore oil flow through the strait, the timeline for returning to prewar traffic levels remains uncertain. The deal represents a significant step toward normalizing global oil supply chains and relieving pressure on fuel prices, though substantial recovery is still needed to reach pre-conflict pricing levels.