US Gas Prices Drop Below $4 After Iran Deal Reopens Hormuz

The national average price for regular gasoline fell to 3.999 dollars per gallon on Thursday, the first time it has slipped below four dollars since March 30. Data from the American Automobile Association showed a decline of nearly three cents from the previous day, with GasBuddy recording an average near 3.98 dollars early in the day. Twenty-eight states now post averages below four dollars, led by Indiana at 3.40 dollars, while California remains highest at 5.64 dollars.

The decline followed the signing of a memorandum of understanding between the United States and Iran that provides for reopening the Strait of Hormuz. The waterway, which carries roughly 20 percent of global oil and liquefied natural gas shipments, had been closed since late February amid military conflict. That closure removed substantial supply from world markets and drove crude prices sharply higher. The national gasoline average climbed above four dollars in late March and reached a 2026 peak of 4.56 dollars on May 21.

Prices began retreating after Memorial Day as expectations of a negotiated settlement grew. Brent crude fell below 78 dollars per barrel once the agreement was announced. The drop marks the fourth consecutive week of declining pump prices and reverses more than half of the 52-cent increase recorded over the prior month. Diesel prices have also eased from recent highs, though they remain above five dollars per gallon.

Before the Hormuz disruption, the national average stood near 2.79 dollars in January. The rapid rise and subsequent fall illustrate how directly supply constraints affect consumer costs. Markets respond to changes in available volume without regard for political statements or forecasts; when a major route is blocked, buyers compete for fewer barrels and prices adjust accordingly. When access is restored, the same mechanism works in reverse.

The episode also shows the limits of assuming quick reversals. Even with shipping lanes reopening, inventories and production schedules take time to realign. Gulf producers that curtailed output during the conflict cannot restore full volumes overnight. As a result, prices are unlikely to return immediately to pre-February levels despite the cease-fire.

Consumer sentiment improved modestly once prices began to moderate, according to recent surveys, consistent with the direct link between energy costs and household budgets. The episode underscores that transportation fuels remain sensitive to geopolitical interruptions and that policy choices affecting supply carry measurable price consequences for millions of drivers.