Fuel Prices Set to Surge in Israel Amid Rising Tensions with Iran

Israeli drivers face a significant increase in fuel prices starting August 1, with 95-octane gasoline expected to reach 7.75 shekels per liter at self-service stations, marking a rise of 25 to 30 agorot. Full-service fuel prices are also expected to surpass 8 shekels per liter, reversing a previous decline seen in July. This sharp price hike is driven by escalating tensions between the United States and Iran in the Persian Gulf, which have disrupted global energy markets.

Since July 1, when fuel prices dropped by 32 agorot to 7.48 shekels due to a temporary easing of tensions and the reopening of the Strait of Hormuz, the situation has deteriorated. The U.S. military's renewed attacks on Iran and the blockage of oil tankers have caused Brent crude oil prices to jump approximately 24 percent, from $77 per barrel at the end of June to around $96 currently. Concurrently, the Israeli shekel weakened against the dollar, which rose about 2.5 percent to roughly 3.06 shekels per dollar, further pressuring fuel costs.

The official fuel price will be set by the Ministry of Energy after averaging oil prices and the dollar exchange rate over five days next week. Economic analysts warn that this fuel price surge could intensify inflation, potentially delaying the Bank of Israel's next interest rate cut. Consumer price index forecasts predict a 0.3 percent increase in July and 0.7 percent in August. Rising fuel costs are expected to impact a wide range of goods and services, from food prices to public transportation.

The ongoing security escalation involving Iran and the possibility of Israel becoming involved in the coming week may continue to keep energy prices elevated. As long as the geopolitical tensions persist, high fuel prices are likely to remain a burden on the Israeli economy and consumers.