Gasoline prices fell 12% in June, helping to drag down both producer and consumer inflation — but that relief may be short-lived. The producer price index dropped 0.3% last month, while the consumer price index slid 0.4%, according to government data. The declines came as Brent crude, which had surged 63% during the first month of the US-Iran war, fell back to $70 a barrel by July 1.
Ceasefire collapse and a new blockade
The Islamabad Memorandum ceasefire, signed June 17, had paused the conflict. But it unraveled on July 8, when Iran allegedly struck commercial ships. President Trump responded on July 13 by reinstating a naval blockade of the Strait of Hormuz, a chokepoint that carries roughly one-fifth of the world's oil. MarineTraffic recorded just 57 transits through the strait from July 11 to 13 — down more than 50% from the prior week. Before the war began in February 2026, the strait typically saw about 130 transits a day.
The US Department of Energy reported that 8.5 million barrels crossed the strait on July 13 with military assistance, matching normal daily flows. But the blockade has already pushed Brent crude up 18% in a week. Gasoline prices, despite the June drop, remain nearly 43% higher than a year ago.
Oil's grip on the inflation outlook
Core PPI fell to 4.7% in June, below the 5.2% economists expected, and month-over-month PPI posted its biggest decline since April 2025. But the oil market is now the dominant variable. Sparta Commodities analyst June Goh warned that the remaining buffer of oil is nearly empty and that disruptions could spread to the Bab el-Mandeb Strait if Houthi forces join the attacks. TD Securities strategist Bart Melek sees $100 oil as possible if physical shortage risks become real.
Fed Chair Kevin Warsh told Congress he will not tolerate persistently elevated inflation. Markets currently price an 87.7% chance that the Federal Reserve will hold rates steady at its July 29 meeting. David Russell, global head of market strategy at TradeStation, said there is no near-term pressure on the Fed but added that oil is in the driver's seat over the longer term.
Strategic reserves at historic lows
The US Strategic Petroleum Reserve is at its lowest level since 1983, limiting the government's ability to cushion a supply shock. With the blockade in place and the ceasefire dead, the question is how long the military-assisted flow of 8.5 million barrels a day can hold. If transits drop further or Houthis widen the conflict, the June price relief could vanish fast.
