Gasoline prices soar as Strait of Hormuz closes due to Iran war
Iran’s closure of the Strait of Hormuz is raising gasoline prices, threatening oil supplies and raising concerns about the impact on the global economy.
U.S. stocks fell throughout the day, with the blue-chip Dow index closing around 800 points lower as oil prices rose above $80 a barrel, the highest in more than a year, after Iran said it had hit a tanker with a missile off the coast of Iraq.
The missile attack signals a growing risk to ships in the Persian Gulf across the Strait of Hormuz. Iran earlier announced it had closed the Strait of Hormuz, through which about a fifth of the world’s oil and liquefied natural gas passes. President Donald Trump has offered U.S. Navy ships to protect the waterway, but shipping bottlenecks have held up oil and container ships. Oil prices have soared to their highest level since January 2025, with blockades limiting supplies and attacks spreading to more countries in the region.
Although many analysts and economists are not yet concerned that the recent rise in oil prices will significantly boost inflation or bring the economy to a standstill, they acknowledge that the longer the disruption lasts, the more likely it is that inflation will flare up again.
“The situation is very uncertain, but if WTI stays around $80 for a few months and then falls later this year, the direct impact on inflation could be as little as 0.3%,” said Stephen Brown, deputy chief North American economist at research firm Capital Economics.
The blue-chip Dow Jones Industrial Average fell 1.61%, or 784.67 points, to close at 47,954.74, while the S&P 500 composite index fell 0.56%, or 38.79 points, to 6,830.71. The tech-heavy Nasdaq fell 0.26% (58.498 points) to 22,748.986. Meanwhile, West Texas crude oil rose 6.64% to $79.62 per barrel.
Rising oil prices aren’t the only thing disrupting the market
Beyond oil prices, some economists are concerned that the economy’s resilience will keep inflation high.
“Perhaps the more important issue for the Fed is that oil prices are rising at a time when other indicators of pipeline inflationary pressures are also rising,” Brown said.
Tariffs and developments in AI are also putting upward pressure on producer prices for IT equipment, and more recently memory chips, he noted. He said consumer prices for IT equipment and mobile phones will rise this year due to rising prices of memory chips.
Brown said all of these factors could prevent the Federal Reserve from cutting interest rates this year.
The CME Fed Watch tool, which uses market data to estimate the likelihood of a Fed rate cut, puts the probability of a rate cut this month at just 2.7%, from less than 11% in April to about 30% in June. Both rates are less likely to be cut than they were a month ago.
The benchmark 10-year U.S. Treasury yield rose for the fourth day in a row on these concerns about inflation. The previous increase rate was 4.131%.
(Updated with new information.)
Medora Lee is USA TODAY’s money, markets and personal finance reporter. Please contact us at mjlee@usatoday.com. Subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
