U.S. Gas Prices Fall Below $4 as Iran Deal Eases Supply Fears

U.S. gasoline prices have dropped below $4 a gallon for the first time since mid-April, after a memorandum of understanding signed between the United States and Iran is expected to reopen the Strait of Hormuz and restore regular energy supplies from the region. The decline offers President Donald Trump some relief ahead of the November midterm elections, after he pledged to lower the cost of living, especially energy prices, but struggled to do so amid disruptions linked to the war in Iran.

The $4-a-gallon level is widely seen as a psychological threshold for consumers, often prompting them to cut back on driving and fuel use. Trump said the Strait of Hormuz would reopen after Friday's signing ceremony, but experts have warned it could still take several weeks before ship traffic returns to prewar levels.

Patrick De Haan of GasBuddy told Reuters that “the real test now is what happens in the Strait of Hormuz. Reopening and returning to regular oil supply would be the clearest sign that the relief is stable and lasting.” He added that the national average price could keep falling if there is no sharp reversal and the United States and Iran continue moving in a positive direction.

Separately, the U.S. Strategic Petroleum Reserve has fallen to its lowest level since 1983. Official data released Monday showed inventories at 340.3 million barrels, far below the reserve's 714 million-barrel capacity. The stockpile was created in 1975 after the oil embargo, and the decline reflects the administration's March decision to release 172 million barrels over 120 days because of the war's effects. Former President Joe Biden also tapped the reserve in 2022, releasing 180 million barrels after Russia's invasion of Ukraine.