WASHINGTON
WASHINGTON — Gas in the U.S. now costs about $4.06 a gallon, close to a dollar more than it cost a year ago. It is the highest August price ever recorded. The reason is a war. The U.S. and Israel have been fighting Iran since late February. Shipping slowed through the Strait of Hormuz, a narrow neck of water that about a fifth of the world's oil passes through. This week President Trump announced what he called economic warfare on Iran. The plan punishes other countries and companies that keep buying Iranian oil. Peace talks between the two countries missed a deadline on August 17 and have not restarted since.
Why it matters: Higher gas prices show up in the family car and in the price of anything a truck delivers.
WASHINGTON
WASHINGTON — The national average price of gasoline stands at about $4.06 a gallon, close to a dollar above where it was a year ago and the highest level ever recorded for August. The cause is not domestic. The U.S. and Israel have been at war with Iran since late February, and shipping through the Strait of Hormuz, the narrow passage carrying roughly a fifth of the world's seaborne oil, has not returned to normal. Brent crude spiked to $112 a barrel in March and has settled near $85. This week the administration announced what it calls Operation Economic Fury, an escalation built around secondary sanctions. Treasury Secretary Scott Bessent warned that companies and countries continuing to buy Iranian oil would face the full force of the U.S. government. The obvious targets are China and India, Iran's largest customers. Analysts disagree sharply about whether this works. Richard Goldberg argues that months of strikes and a naval blockade have created conditions unlike previous sanctions rounds, and that the outcome is genuinely unpredictable. Ali Vaez of the International Crisis Group counters that Iran has absorbed sanctions for four decades and that pressure without a credible offer of relief accomplishes nothing. Both are describing the same facts and reaching opposite conclusions, which is a fair signal of how uncertain this is. A 60-day negotiating deadline passed on August 17 with no agreement on Iran's nuclear program. The congressional Joint Economic Committee estimates Americans have paid about $56.4 billion extra for fuel over six months, roughly $477 per household.
Background
Sanctions on Iran are not new; the U.S. has maintained some form of them since 1979. What is new is the combination with active warfare and a disrupted Hormuz. Secondary sanctions work by making third parties choose between the U.S. financial system and the sanctioned country, which is effective when the dollar is unavoidable and less so as trade routes around it develop.
Why it matters: Sanctions designed to pressure a foreign government are also a tax on American drivers. Whether that trade is worth making is a political judgment, not a technical one, and it is being made without a vote.
What to watch: Whether China's refiners actually cut Iranian purchases, and whether any date is set for talks to resume. Both are observable within weeks.