The conflict between the US and Iran reignites and causes an increase in oil prices! The price of gasoline in the US may soar back to $4, putting pressure on Trump's midterm elections.

As tensions between the US and Iran rise again, the re-increase in oil prices could push US gasoline prices back to $4 per gallon. In the past two days, traders on the prediction market platform Kalshi predicted that the probability of US gasoline prices exceeding $4 per gallon has risen to 93%, and the probability of exceeding $4.10 per gallon is 63%; traders also predicted that the probability of US gasoline prices rising above $4 per gallon before the end of this month has increased significantly from 56% to 90%. This contract predicts the level of US gasoline prices this month, and the final result will be settled based on data released by the American Automobile Association (AAA). According to data from the AAA, the average price of gasoline across the US was $3.89 per gallon on Wednesday, up about 3 cents from Tuesday. Patrick DeHaan, head of petroleum analysis at the fuel price monitoring platform GasBuddy, also predicted that the average national gasoline price will return to $4 per gallon within 7 to 10 days. Last month, the average price of gasoline in the US surpassed $4 per gallon, but the highest average price of gasoline in the US so far this year was on May 21st, reaching $4.56 per gallon. Traders on Kalshi believe that the likelihood of gasoline prices exceeding $4.50 per gallon by the end of this month is very low, with a probability of less than 5%. The market's bet on the re-rise in US gasoline prices stems from the recent escalation in US-Iran tensions. Since July 11th, the US military has carried out military strikes against Iran for five consecutive days. On July 15th local time, the US carried out two waves of attacks on Iran, targeting objectives "aimed at weakening Iran's control of the Strait of Hormuz." In response to the US attacks, Iran has been conducting continuous strikes on multiple US military bases in the Middle East, including in Bahrain, Jordan, and Kuwait. On July 14th, US President Trump threatened in an interview that he would strike Iran's energy facilities and bridges until they "return to the negotiating table." Trump also said that he did not rule out the possibility of sending ground troops to Iran. The day before, Trump said on a show that the US "may soon" strike the "pickaxe" underground nuclear facility near Iran's Natanz uranium enrichment plant. On July 15th, Trump said that Iran wanted to reach an agreement. In response, Iranian Foreign Ministry spokesman Baghaei said that Iran currently has no negotiation plans and is focused on defense. Baghaei said that the Iran-US Understanding Memorandum is a series of mutual commitments, and if the other party violates them, Iran will stop fulfilling its commitments. This is a principle, and in the future, Iran will continue to follow this path. Baghaei said that Iran's armed forces have shown that any infringement on Iranian territory will be met with corresponding retaliation. Analysts point out that the ongoing mutual strikes between the US and Iran have gradually evolved into a long-term game for control of the Strait of Hormuz. In the past few days, the common characteristic of the key locations targeted by the US military strikes has been their proximity to the Strait of Hormuz, playing an important role in Iran's maritime traffic, energy exports, and military deployment. The US is trying to weaken Iran's military and logistical capabilities in the areas around the strait by continuously striking these maritime nodes. Iran's response has expanded the scope of strikes to include US military presence in the Gulf region, while also strengthening Iran's actual control over the Strait of Hormuz. Iranian Deputy Foreign Minister Garibabadi recently stated that in a state of war, Iran has complete control over the Strait of Hormuz. Iran does not allow this important waterway to be used for actions that endanger national security. More notably, Iran is pushing to further "legitimize" the management of the Strait of Hormuz domestically, with a bill on long-term management of the Strait of Hormuz submitted to the Iranian parliament. This means that some political forces in Iran hope to elevate the management of the strait from military action and policy tools to a national legal framework. For Iran, the Strait of Hormuz is no longer just a shipping issue, but has become the most important strategic chip in the current US game. In the future, the confrontation between the US and Iran over the Strait of Hormuz may continue to normalize, with no clear signs of concession from either side in the short term. Against this backdrop, shipping through the Strait of Hormuz has once again stalled, and international oil prices have risen for three consecutive trading days. On Wednesday, WTI crude oil for August delivery closed at $79.60 per barrel, while Brent crude oil for September delivery closed at $84.95 per barrel. Additionally, recent record-breaking US refined oil exports are being used to fill the supply gap in the Middle East, but domestic gasoline inventories are 6% lower than the five-year average for the same period. Alex Hax, policy research director at the left-wing think tank Groundwork Collaborative and advisor to the Biden administration, stated that there is currently no fuel shortage in the US, but if shipping through the Strait of Hormuz continues to be interrupted, end fuel prices will continue to rise. He added that the strait accounts for about one-fifth of global oil and oil product transportation, and once the waterway is closed, it will directly reduce global supply. Buffering the gap with strategic reserves and suppressing demand will only partially offset the loss of millions of barrels of daily transportation. Gasoline prices are one of the most direct indicators of inflation perceived by the American people. Although overall prices are still below the historical peak of over $5 per gallon after the Russia-Ukraine conflict in 2022, the rapid rise in US gasoline prices is enough to raise market alertness. The rapid increase in gasoline prices not only undermines Trump's core political commitment to controlling inflation but also casts a shadow over his economic agenda as the midterm elections approach. Analysts say that the continued rise in oil prices may adversely affect the Republican Party in the November midterm elections when both parties will be vying for control of Congress. Voters have already expressed dissatisfaction with high living costs and Trump's economic governance style. According to research by Ryan Camins and Neil Maioni at the Stanford Institute for Economic Policy Research, even considering other economic impacts, a $1 increase in gasoline prices leads to a decrease of 4.5 points or more in the Consumer Confidence Index in the Michigan survey. Camins, who previously served as an economist on the Biden administration's Council of Economic Advisers from 2021 to 2023 focusing on gasoline policy, stated that this "roughly means that for every $1 increase in gasoline prices, people's economic sentiment deteriorates by 5%." As energy prices fall, pressure on US prices eased in June compared to expectations, but rising fuel costs could make the outlook for US inflation more complex. Energy industry professionals point out that while June US inflation data reflected a easing of price pressures primarily due to falling energy costs, continued increases in gasoline prices in July could quickly change the situation, affecting not just fuel itself rising gasoline prices will push up transportation costs, freight rates, and broader logistics expenses, ultimately transmitting to the prices of goods and services across the entire economy. Mark Zandi, chief economist at Moody's Analytics, stated that if tensions escalate in the Middle East and the Strait of Hormuz remains basically closed for several weeks, global oil inventories are expected to further decrease. In this scenario, prices of oil, gasoline, and other energy sources will skyrocket, and the physical shortage of supplies will be felt globally.