Gas prices hit $4 as oil spikes
Gasoline prices across the United States have climbed back above $4 per gallon, with oil prices surging more than 15% in a single week as the US-Iran conflict escalates. The blockade of the Strait of Hormuz has disrupted the flow of crude oil from the Middle East, with US forces boarding vessels and Iranian attacks threatening shipping lanes.
The national average gas price jumped sharply as markets priced in the risk of prolonged disruption. Crude oil benchmarks have erased earlier gains at times on signs that negotiations could still be pursued, but the overall trajectory has been sharply upward since the conflict began.
Consumer impact widens
Higher fuel costs are rippling through the broader economy. Delta Air Lines CEO Ed Bastian warned that fares will stay elevated even if jet fuel prices fall. Consumer inflation, which had cooled to a 3.5% annual rate in June, now faces renewed upward pressure from energy costs. Bank of America data showed consumer spending growth hit a four-year high in June, partly driven by World Cup tourism, but the outlook for the second half of the year is clouded by rising energy costs.
Fed faces new inflation pressure
Federal Reserve Chairman Kevin Warsh, in his first congressional testimony, said the central bank has "no tolerance" for elevated inflation but did not specify whether higher interest rates would be needed. The combination of energy shocks and persistent price pressures presents a difficult challenge for monetary policy as the Fed weighs its next moves.