Oil prices plummeted on Wednesday amid optimism the U.S. and Iran are nearing an agreement to end the war and reopen the Strait of Hormuz.

The Latest U.S.-Iran News Sent Oil Tumbling. What Does That Mean for Gas Prices?

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Full Bio Colin is an Associate Editor focused on tech and financial news. He has more than three years of experience editing, proofreading, and fact-checking content on current financial events and politics. He received his M.A. in journalism from The New School and his B.A. in history and political science from McGill University.

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Published May 06, 2026

04:37 PM EDT

A customer pumps gas into his car.

Oil futures tumbled on Wednesday following reports the U.S. and Iran are nearing a deal to end their two-month-old war. Justin Sullivan / Getty Images

Key Takeaways

Oil prices plummeted on Wednesday amid optimism the U.S. and Iran are nearing an agreement to end the war and reopen the Strait of Hormuz.
U.S. gas prices, at their highest level since July 2022, are likely to take a while to moderate.
Experts warn it will take months for global oil supplies to return to pre-war levels, and even longer for that normalization to pass through to prices.

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Oil prices are plummeting again. Don't expect to see that at the gas station tomorrow.

The price of oil tumbled on Wednesday following reports the White House believes it is close to reaching an agreement with Iran that would end the two-month old war and set the stage for nuclear negotiations.1 West Texas Intermediate futures, the U.S. benchmark, were recently trading around $95 a barrel, down from yesterday’s high above $105. Brent crude, the global benchmark, recently traded for about $102 a barrel after climbing above $114 yesterday. (Read today's full markets roundup here.)

Meanwhile, the average price of gasoline in the U.S. ticked up 5 cents on Wednesday to $4.54 a gallon, its highest since July 2022. Only three states—Louisiana, Mississippi, and Oklahoma—have average gas prices below $4. Gas prices have risen more than 50% since the start of the war in Iran, driven higher by the shutdown of the Strait of Hormuz, through which about a fifth of the world’s oil and natural gas passed before the war.

Why This Is Important

As of Wednesday, the average American is spending more for a gallon of gasoline than any time since July 2022, and 50% more than they did just two months ago. Higher prices for gas and diesel—major consumer and business costs—are likely to continue putting upward pressure on inflation and drag on the economy until they moderate.

Crude oil is the single largest determinant of gasoline prices, accounting for a little over half of what drivers pay at the pump, according to the U.S. Energy Information Administration.2 Experts warn that gas prices are likely to stay elevated throughout the summer without sustainably lower oil.

“Consumers may not see meaningful relief for a while,” wrote Bank of America economist Stephen Juneau in a note on Wednesday, who thinks gas could stay around $4 throughout the summer.3

Whether gas follows oil prices lower or continues to rise will depend on the outcome of negotiations to end the war and reopen the Strait of Hormuz. President Trump on Wednesday said on Truth Social that the U.S. would resume its bombing campaign “at a much higher level and intensity” if Iran did not accept the agreement to end the war and reopen the strait.4

Even if the Strait of Hormuz reopens soon, experts say it will take months before traffic returns to pre-war levels. It could take longer for oil production in the Middle East to return to normal due to attacks on energy infrastructure and temporary oil well shutdowns.

Related Education

[What Determines Oil Prices?

Factors That Affect Oil Prices ](https://www.investopedia.com/articles/economics/08/determining-oil-prices.asp) [Gas Prices Top $4.50 for First Time Since July 2022—Only 3 States Remain Below $4

US state map with different states shaded in varying tones of red and blue indicating categories or data ](https://www.investopedia.com/gas-prices-top-4-50-for-first-time-since-july-2022-only-3-states-remain-below-4-11968194)

Gas prices are notorious for moving much slower than oil prices, especially on the way down, which is why experts often say prices at the pump "rise like a rocket and fall like a feather." Crude oil prices declined 25% in the 10 days after the U.S. and Iran agreed to a ceasefire on April 7. Gas prices, meanwhile, fell less than 2% over the same period.

The U.S., as the largest oil producer in the world, is more insulated from the Strait of Hormuz closure than much of Asia and Europe, but those countries that have lost supply are scrambling to replace it, driving up demand and prices across the globe. U.S. crude and fuel inventories continued to decline last week as exports of refined petroleum products rose to a record high, according to the EIA.5

Soaring gas prices have upped the financial pressure on U.S. consumers, especially those with the lowest incomes. According to Bank of America card data, more than 10% of lower-income households spent more than 10% of their monthly income on gasoline in March, up from 8% last year. That number likely increased last month as fuel prices continued to climb.

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