NEW YORK (AP) 鈥� The average U.S. price for a gallon of gas fell below $4 on Thursday, hitting a level not seen since the first full month of the and providing a bit of relief to consumers squeezed by soaring costs.
Although the between the U.S. and Iran and the resumption of oil shipments through the Strait of Hormuz are pushing energy prices downward, the cost of gas is still much higher than before the war began on Feb. 28.
According to motor club AAA, a gallon of regular gasoline averaged $3.999 on Thursday. It was the first time that prices were that low. And the drop aligns with overall, with markets expressing optimism in recent weeks about the prospect of a peace deal.
Even with prices dropping, American drivers are collectively paying about $1 more per gallon than they were before the war, and gas is 25% more expensive than it was this time last year. That has caused many households to tighten their budgets and .
More expensive bills beyond gas
Research has shown that short-term swings in the cost of gas leads consumers to adjust their driving and wider spending, with some even pulling back on core necessities such as groceries when gas prices get high, said Dylan Brewer, an assistant professor in Georgia Tech鈥檚 School of Economics.
If costs continue to fall in the coming weeks, he said, more people may be able to 鈥渓oosen their belts a little bit.鈥� Businesses that rely on gas and diesel to transport their goods will also benefit, but it could take a few months for that to trickle through the supply chain, Brewer added.
Gas isn’t the only thing that’s gotten more expensive during the war. Groceries, airline tickets and even and shoes cost more amid global supply chain disruptions. Even if oil and other core necessities such as fertilizer begin flowing from the Middle East again, experts warn that the high costs .
鈥淧roduct prices across the United States are projected to keep climbing for the rest of 2026,” Pat Penfield, a professor of supply chain practice at Syracuse University, said Thursday.
Penfield pointed to depleted inventories and supply chain problems caused by the war, noting that farmers, for example, had to pay more for fertilizer and other supplies this spring, which will 鈥渞ipple through to increased food prices by autumn.鈥� At the gas pump, meanwhile, limited refinery capacity in the U.S. 鈥渞emains a significant bottleneck鈥� toward bringing down prices further, he said.
What prices at the pump look like nationwide
Steep fuel costs have to its highest level in three years. And many consumers are still paying much more than $4 per gallon to fill their tanks.
That price is a national average, with costs varying between states due to factors like proximity to supply and differing tax rates. In California on Thursday, the average price for regular gas was about $5.64, according to AAA. Next costliest was Hawaii, at $5.57. Meanwhile, prices in Indiana and Texas sat at about $3.40 and $3.49 a gallon, respectively.
Recent relief for fuel prices arrived with a drop in costs for crude oil, the main ingredient in gasoline.
Brent crude, the international standard, . And U.S. benchmark crude tumbled to below $76 per barrel. That’s still a little higher than the roughly $70 price tag before the war, but far below the $100-plus price from just a few weeks ago.
Why oil costs are falling
Prices fell overnight Wednesday into Thursday after President signed the tentative agreement with Iran. It calls for Tehran to dilute its and, in a significant concession from Washington, waives U.S.-backed , immediately allowing Iran to .
Major ship owners have also through the Strait of Hormuz since the memorandum of understanding was signed Wednesday, according to maritime data from Lloyd鈥檚 List Intelligence, although some reported that only were open. And U.S. Vice President JD Vance said Thursday that the U.S. Navy has to allow some transit to and from Iranian ports.
Still, it could take for traffic to return to prewar levels. Before the war, the strait carried a fifth of the world鈥檚 crude oil. And Gulf oil producers that throttled back production will need time to get the oil moving again.
Some ship captains may take their time to determine if the passage is safe. The agreement between the U.S. and Iran calls for a permanent end to hostilities and starts a 60-day negotiating clock to reach a final deal on the future of Iran鈥檚 nuclear program, though Trump left the door open to resume attacks.
Refineries also typically pay for crude oil a month or more in advance, so even after oil prices drop, they be processing cheaper products. Energy shocks have been even starker in places that rely more heavily on imports from the Middle East 鈥� notably and .
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