The average U.S. price for a gallon of gas has dropped below $4, hitting a level not seen since the first full month of the war with Iran and providing a bit of relief to consumers squeezed by soaring costs.

Although the tentative peace deal between the U.S. and Iran and the resumption of oil shipments through the Strait of Hormuz are pushing energy prices downward, the cost of gas is still much higher than before the war began on Feb. 28.

According to motor club AAA, a gallon of regular gasoline averaged $3.999 on June 18. It was the first time since late March that prices were that low. And the drop aligns with easing crude oil costs overall, with markets expressing optimism in recent weeks about the prospect of a peace deal.

Even with prices dropping, American drivers are collectively paying about $1 more per gallon than they were before the war, and gas is 25% more expensive than it was this time last year. That has caused many households to tighten their budgets.

More expensive bills beyond gas

Research has shown that short-term swings in the cost of gas leads consumers to adjust their driving and wider spending, with some even pulling back on core necessities such as groceries when gas prices get high, said Dylan Brewer, an assistant professor in Georgia Tech’s School of Economics.

If costs continue to fall in the coming weeks, he said, more people may be able to “loosen their belts a little bit.” Businesses that rely on gas and diesel to transport their goods will also benefit, but it could take a few months for that to trickle through the supply chain, Brewer added.

“Product prices across the United States are projected to keep climbing for the rest of 2026,” Pat Penfield, a professor of supply chain practice at Syracuse University.

Penfield pointed to depleted inventories and supply chain problems caused by the war, noting that farmers, for example, had to pay more for fertilizer and other supplies this spring, which will “ripple through to increased food prices by autumn.” At the gas pump, meanwhile, limited refinery capacity in the U.S. “remains a significant bottleneck” toward bringing down prices further, he said.

What prices at the pump look like nationwide

Steep fuel costs have already pushed U.S. inflation to its highest level in three years. And many consumers are still paying much more than $4 per gallon to fill their tanks.

That price is a national average, with costs varying between states due to factors like proximity to supply and differing tax rates. In California, the average price for regular gas was about $5.64, according to AAA. Next costliest was Hawaii, at $5.57. Meanwhile, prices in Indiana and Texas sat at about $3.40 and $3.49 a gallon, respectively.