The war between the US and Iran is starting again with fuel prices! The price of gasoline in the US may return to 4 dollars Trump's midterm election pressure has soared

The Zhitong Finance App learned that as the situation between the US and Iran becomes tense again, a new rise in oil prices may push the US gasoline price back to 4 US dollars per gallon. Over the past two days, on the prediction market platform Kalshi, traders expect that the probability of US gasoline prices breaking through $4 per gallon has risen to 93%, and the probability of breaking through $4.10 per gallon is 63%; traders also expect that the probability that US gasoline prices will rise above $4 per gallon by the end of this month has risen sharply from 56% to 90%. This contract predicts the level of gasoline prices in the US this month, and the final results will be based on data published by the American Automobile Association (AAA). According to the American Automobile Association (AAA), the average price of gasoline across the US was $3.89 per gallon on Wednesday, up about 3 cents from Tuesday. Patrick DeHaan, head of petroleum analysis at the fuel price monitoring platform GasBuddy, also predicted that within 7 to 10 days, the average gasoline price across the US will return to the important psychological threshold of 4 US dollars/gallon.

Last month, the average price of gasoline in the US surpassed 4 US dollars per gallon, but since this year, the highest average gasoline price in the US occurred on May 21, when it reached 4.56 US dollars per gallon. Kalshi traders believe that it is extremely unlikely that gasoline prices will break through $4.50 per gallon again by the end of this month; the probability is less than 5%.

The market's bet on a new rise in US gasoline prices stemmed from the recent escalation of the situation between the US and Iran. Since July 11, the US military has launched military attacks on Iran for 5 consecutive days. On July 15, local time, the US military launched two waves of attacks against Iran. The targets of the attacks were “aimed at weakening Iran's ability to control the Strait of Hormuz.” In response to US attacks, Iran has continued to attack various US military bases in the Middle East over the past few days, and US military facilities in Bahrain, Jordan, Kuwait and other places have all been attacked.

In an interview on July 14, US President Trump threatened to attack Iran's energy facilities and bridges until they “return to the negotiation table.” Trump also said he will not rule out the possibility of sending ground forces to Iran. The day before, Trump said on a program that the US “may soon” attack the “Haoshan” underground nuclear facility near Iran's Natanz uranium enrichment facility.

On July 15, Trump said Iran wanted to reach an agreement. In response, Iranian Foreign Ministry spokesman Bagae said on the same day that Iran currently has no negotiation plans, but is focusing on defense. Bagae said that the memorandum of understanding between the US and Iran is a series of mutual commitments. If the other side violates it, Iran will also stop fulfilling its promises. This is a principle, and it will continue to follow this path in the future. Bagae said that Iran's armed forces have shown that any encroachment on Iranian territory is bound to be countered accordingly.

Analysts pointed out that at present, this round of mutual attacks between the US and Iran, which has continued for many days, has gradually evolved into a long-term game over control of the Strait of Hormuz. Over the past few days, the US military's key strike locations all have a common characteristic. They are all close to the Strait of Hormuz and are responsible for the important functions of Iran's maritime traffic, energy exports, and military deployment. The US is trying to weaken Iran's military and logistical capabilities around the strait by continuously attacking these maritime nodes.

Iran's response was to expand the scope of the attack to the US military presence in the Gulf region. At the same time, Iran also strengthened its actual control over the passage through the Strait of Hormuz. Iran's Deputy Foreign Minister Garibabadi said a few days ago that in a state of war, Iran has complete control over the Strait of Hormuz. Iran will not allow this important waterway to be used for actions that endanger national security.

What is more noteworthy is that Iran is promoting further “legalization” of the management of the Strait of Hormuz, and a bill involving the long-term management of the Strait of Hormuz has already been submitted to the Iranian parliament. This means that some political forces in Iran want to pass legislation to elevate the management of the straits from military action and policy tools to a national legal framework.

For Iran, the Strait of Hormuz is no longer just a shipping issue; it has become the most important strategic bargaining chip in the current game against the US. Next, the battle between the US and Iran over the Strait of Hormuz may continue to be normalized, and there is no clear sign of either side making concessions in the short term.

In this context, shipping in the Strait of Hormuz has once again come to a standstill, and international oil prices have been rising for three consecutive trading days. On Wednesday, WTI crude oil's August delivery futures closed at $79.60 a barrel, and the benchmark Brent crude oil September delivery futures closed at $84.95 a barrel.

Furthermore, the US recently set a new record for refined oil exports to fill the Middle East supply gap for refined oil products, but domestic gasoline inventories are 6% lower than the average for the same period of five years. Alex Hax, head of policy research at the left-wing think tank Groundwork Collaborative and an adviser to the Biden administration, said there is no shortage of fuel in the US at this stage, but if shipping in the Strait of Hormuz continues to stagnate, terminal fuel prices will continue to rise. He added that the strait is responsible for about one-fifth of the world's crude oil and oil transportation. Once the waterways are closed, it will directly cut global supply. Releasing strategic reserves and curbing demand can only slightly cushion the gap and cannot completely fill the daily transportation volume of millions of barrels.

Gasoline prices are one of the most intuitive indicators for Americans to perceive inflation. Although the overall price is still below the historical peak of more than $5 per gallon after the outbreak of the Russian-Ukrainian conflict in 2022, the rapid rise in gasoline prices in the US itself is enough to alert the market.

The rapid rise in gasoline prices has not only shaken Trump's core political commitment to curb inflation, but has also cast a shadow over Trump's economic agenda as the midterm elections approach. Analysts said that the continued rise in oil prices may adversely affect the Republican Party in the November midterm elections, when the two parties will compete for control of Congress. Voters have previously been unhappy with the high cost of living and Trump's way of governing the economy.

According to research by Ryan Cummings and Neil Mahoney of the Stanford Institute for Economic Policy Research, even if other economic effects were taken into account, the consumer confidence index in the University of Michigan survey would drop 4.5 points or more if gasoline prices rose by $1 per gallon. Cummings (working on gasoline policy from 2021 to 2023), an economist who worked on the Biden administration's Economic Advisory Committee, said that “roughly means that if the price of gasoline rises by $1 per gallon, people's feelings about the economy will worsen by 5%.”

As energy prices fell, the pressure on US prices eased somewhat compared to expectations in June, but now fuel costs have risen again, which may complicate the outlook for US inflation. Energy industry sources pointed out that although the US inflation data for June showed that the easing of price pressure was mainly due to falling energy costs, the continued rise in gasoline prices in July may rapidly change this situation, and the impact is far more than fuel itself — rising gasoline prices will drive up transportation costs, freight rates, and broader logistics expenses, which will eventually spread to the prices of goods and services throughout the economy.

Mark Zandy, chief economist at Moody's Analytics, said that if the situation in the Middle East escalates, the Strait of Hormuz will remain basically closed within a few weeks, and global oil stocks are expected to decrease further. Under these circumstances, the prices of oil, gasoline, and other energy sources will soar rapidly, and there will be a global shortage of physical supplies.