Israel Faces Significant Fuel Price Hike Amid Rising Oil Costs and Regional Tensions

Fuel prices in Israel are expected to rise significantly starting the weekend between July 31 and August 1. If the current security tensions persist without drastic changes, the Strait of Hormuz remains partially closed, and the US dollar stays above three shekels, the price of a liter of 95-octane gasoline at self-service stations will increase by approximately 25 to 30 agorot, reaching around 7.75 shekels. Full-service prices are expected to approach 8 shekels per liter.

The recent sharp increase in global oil prices is driven by escalating tensions between the US and Iran, which have led to the closure of oil tanker routes through the Strait of Hormuz. On July 1, the price of 95-octane gasoline in Israel had dropped by 32 agorot from 7.80 to 7.48 shekels following a temporary easing of tensions and the reopening of the strait.

The upcoming price hike reflects a rise in Brent crude oil prices from $77 per barrel at the end of June to around $96 currently, a 24% increase. Additionally, the exchange rate of the US dollar against the shekel has risen from 2.98 to approximately 3.06 shekels, an increase of about 2.5%. The final fuel price will be determined after averaging oil prices over five days and the official dollar exchange rate at the end of next week.

This unusual rise in fuel costs at the start of August could contribute to higher inflation in Israel, potentially delaying the next interest rate cut. Current forecasts predict the consumer price index will increase by 0.3% in July and 0.7% in August. The Ministry of Energy will publish the updated fuel prices on Thursday, August 3, ahead of the price change taking effect on the evening of August 1.