Fuel prices in the United States rose as tensions around the Strait of Hormuz and supply disruptions originating in Saudi Arabia put pressure on oil markets. Rising costs increased the burden on consumers and businesses while deepening debates over inflation and monetary policy in the US economy.
Brent crude reaches $107.63
After the United States targeted five Iranian oil tankers, Iran's Islamic Revolutionary Guard Corps said on September 9 that two US vessels and eight tankers had been attacked in the Strait of Hormuz. Brent crude rose by more than 3% that day, also affected by attacks on energy facilities in Saudi Arabia, surpassing $100 per barrel for the first time since May 22.
Pressure on the oil market intensified after Saudi Arabia's East-West Petroline, used as an alternative route to the Strait of Hormuz, was taken offline following the attacks. As some refineries faced delays in receiving cargoes, Brent crude rose by more than 6% to $107.63 per barrel.
The impact of the disruptions on actual shipments also supported the price increase. Some oil shipments scheduled for delivery to Europe in September were canceled, while as much as 4% of global oil supplies could be at risk if the pipeline disruption continues.
Diesel prices hit a record in the US
The average price of gasoline in the United States rose to $4.44 per gallon as of September 17. While gasoline prices increased 38.7% from the same period last year, the average price of diesel climbed from $3.70 to $6.40 per gallon, reaching a record level.
Rising fuel costs also increased energy-driven inflationary pressure. The Consumer Price Index rose 0.4% month on month and 3.4% year on year in August, while the 3.9% increase in gasoline prices accounted for more than one-third of the monthly inflation rise.
Pressure from oil prices, spreading across the economy through transportation and production costs, also affected the monetary policy of the Federal Reserve. The Fed raised interest rates for the first time since 2023, increasing the policy rate by 25 basis points and bringing the target range to 3.75%-4%.
Although the rate hike did not eliminate supply shortages in the oil market, it is limiting economic activity by raising borrowing costs. The dollar's appreciation against other currencies makes oil more expensive for buyers using different currencies, suppresses global demand and helps limit the increase in prices.
Fuel price pressure grows ahead of congressional elections
The rapid rise in gasoline and diesel prices increased pressure on the Washington administration to reduce energy costs as the November 3 congressional midterm elections approached. The White House is considering using the Defense Production Act to increase the country's oil refining capacity in an effort to ease the burden on consumers and businesses.
US President Donald Trump said the conflict with Iran would end and that the flow of oil through the Strait of Hormuz would continue. As Brent crude rose above $100 again on September 9, Trump argued that the war would end immediately after the November 3 midterm elections.
Trump also alleged that Iran was trying to influence the elections, claimed that the US Navy had full control of the Strait of Hormuz and said that many oil tankers passed through the strait every day. Trump said gasoline prices would fall once the war ended, and in the following days said the conflict could end before the elections and that the United States had not used all its power against Iran.
Some initiatives in the US House of Representatives sought to withdraw American forces from the conflict with Iran, while the war's economic costs remained on the agenda. On September 14, Trump claimed that Iran wanted to reach a deal with Washington quickly and willingly; Iran said it would not hold talks with the United States until its conditions were met.
Brent crude rose by about 5% during the day on September 14, reaching $109.80 per barrel. After Trump's remarks, Brent gave back most of its gains and ended the day at $105.68, up 1%.
The rise in gasoline and diesel prices in the United States put energy costs at the center of the economic agenda ahead of the midterm elections. The course of the conflict between Washington and Tehran remains important for the direction of fuel prices.
