We would like to say gas prices are coming down. We would like to say oil prices are sliding. We would like to say there’s light at the end of the tunnel in the United States-Israel war against Iran.
But here’s the reality. Oil prices — and gasoline prices — are currently not driven by anything resembling economic forces. It’s all about the war in the Persian Gulf. And that war drags on in the form of angry rhetoric.
There are no negotiations going on to end the conflict, and Iran is attacking ships trying to enter or leave the Persian Gulf. The United States is providing naval escorts to move ships from the Gulf into the Indian Ocean.
Reuters called the situation “a conflict on autopilot.” And it’s a costly conflict.
Related: World’s quietest metal just dropped a huge bullish signal
The 45% hit to Americans’ wallets
Gasoline prices so far in 2026 are still up roughly 45% and up 10% since the July 4 holiday.
The average price over the first 20 days of this month are the highest ever for the first 20 days of August: an average $4.063 per gallon, according to AAA Fuel Prices data.
That beats August 2022, when the average over the first 20 days of the month was $4.029 a gallon.
You may remember 2022 and not with affection. Gas prices soared (along with inflation generally) as the world came out of the COVID-19 pandemic and Russia invaded Ukraine. The U.S. peak came on June 14, 2022, at $5.0165 a gallon nationally.
Usually, gasoline prices are starting to fall. The summer driving season is starting to ebb as families finish off summer vacations. And, in the United States, demand falls into the fall.
Not this year.
AAA’s national average price on Aug. 20, 2026, was $4.1044, up 0.5% from Aug. 19. GasBuddy said its data put the Aug. 20 national average at about $4.093 a gallon, down slightly from the day before.
Prices vary by state with Indiana prices the lowest at $3.56 a gallon, followed by the bulk of southern states. The highest prices are in California, Hawaii, Washington (all above $5 a gallon), Nevada and Oregon.
What to know about gasoline and oil prices
There are three things to remember about this price picture.
- The U.S. national average for gasoline has been above $4 a gallon for at least 30 days after the memorandum of understanding between the United States and Iran, signed on June 17, gave way to more hostilities and the killing of three U.S. service members during a missile attack in Jordan.
- Yet, prices are still lower than in May when AAA’s top price was $4.564 a gallon and GasBuddy’s was $4.567. Both services show little changes in their prices so far in August.
- Diesel prices are soaring, reaching $5.50 a gallon nationally on Aug. 20, according to ValveRide Flow, which tracks truck fuel prices. California had the highest median price: about $6.99 a gallon.
- Light sweet crude, the benchmark for U.S. oil closed at $86.83 per 42-gallon barrel, up 1.2%, per Wall Street Journal data. Brent, the global benchmark, settled at $93.78 a barrel, up 2.4%.
Why gas prices are stuck
The reasons for the high prices are as clear as they were after the United States and Israel attacked Iran on Feb. 27:
- The Strait of Hormuz is still basically closed, even as President Donald Trump insists the U.S. Navy controls it. Some six ships passed through the strait on Aug. 18, Reuters reported. But on Aug. 19, with U.S. Navy escorts, some 15 to 20 tankers transited the strait, Axios reported. Why care about the strait? Before hostilities began, about 20% of the world’s crude oil passed through the strait with tankers transporting the oil to refineries around the world.
AFP / Getty Images
- Despite all the bombs dropped and missiles launched, the Iranian government has not sued for peace. In fact, Wall Street Journal reporting suggests the Iranian government seems to believe it can wait the Trump Administration out. And it’s preparing for more hostilities.
- The United States isn’t making many overtures either. Late on Aug. 19, President Trump promised the “most crushing economic operation ever taken against any country” against Iran. (But he didn’t specify what that meant.) And he threatened severe financial penalties on any nation that helps Tehran evade sanctions, sending oil prices higher. The New York Times suggested that could mean countries like China, India, the United Arab Emirates and Turkey could be exposed to the administration’s wrath.
More Oil & Gas:
- Goldman Sachs doubles down on oil price forecast for 2026
- Drivers lose control over gas price squeeze
- A big shift in the U.S. energy market is about to happen
How markets are behaving
Energy stocks in the United States were higher on Aug. 20, thanks to the news on the war that doesn’t seem to end.
The State Street Energy Select Sector SPDR ETF (XLE) was up 0.3% to $63.75. The ETF is up 43% this year. ExxonMobil (XOM) added 0.8% to $166.15. Conoco Phillips (COP) added 3.3% to $134.89.
Energy was just one of two Standard & Poor’s 500 sectors ahead on Aug. 20. The sector has been the top performer among the 11 S&P 500 sectors in 2026, up 41.6%. Technology is second, up 20%.
U.S. stocks overall slumped on Aug. 20 mostly because of rising interest rates. The S&P 500 was down 0.9% to 7,641. The Dow Jones Industrial Average (DJI) fell 1.3%, or 704 points to 52,759.
Related: Billionaire George Soros makes sevenfold move on AI chip stock in latest 13F
