Overview
Average gasoline prices across the United States rose to levels not seen in nearly four years, with the American Automobile Association reporting a notable uptick following military actions targeting Iran in late February by the U.S. and Israel.
AAA data show that average prices at the pump increased by 7 cents to $4.18 per gallon on Tuesday. That 7-cent move was the largest single-day rise in more than a month, and forms part of a broader increase of $1.19 per gallon since late February - a gain of more than 40%.
Drivers of the increase
Energy costs have risen amid conflict in the Middle East that has disrupted shipping through the Strait of Hormuz. The waterway is a key passage for global energy flows, handling roughly one-fifth of world oil and gas supplies, and limitations on traffic there have contributed to tighter market sentiment.
Analysts have warned that if crude oil prices continue to move higher, gasoline at the pump could follow. Recent spikes in energy costs have also squeezed retail margins, according to reporting that cites market analysts.
"Gross margin for retailers nationwide has typically averaged around 40 cents per gallon over the past five years," said Tom Kloza, chief energy advisor to Gulf Oil. "Retailers saw their margins compressed by about 30 cents as of last week."
Recent oil market moves
Last week, Brent crude futures rose by about 16%, while U.S. West Texas Intermediate increased nearly 13% on supply concerns as efforts to end the Iran conflict stalled. Earlier in the month, oil prices had fallen amid expectations that shipping through the Strait of Hormuz would reopen, but those declines were reversed as tensions persisted.
Implications
The combination of higher crude prices, shipping disruptions through a strategic chokepoint, and narrower retail margins has translated into sharper increases at the pump. Continued crude strength would add upward pressure on gasoline costs for consumers, while compressed retailer margins reflect tightening economics for fuel sellers.