Traders on the prediction market Kalshi now see a 90% probability that U.S. gas prices will exceed $4 per gallon by the end of July, up sharply from 56% just two days ago. The contract, which settles based on AAA data, also shows a 63% chance prices will top $4.10. The surge in odds reflects rising oil prices and renewed U.S. military strikes on Iran.
Rising prices amid geopolitical tensions
On Wednesday, the national average gas price stood at $3.89, about 3 cents higher than the previous day, according to AAA. Last month, the average briefly crossed $4, but the 2024 peak of $4.56 was recorded on May 21. Kalshi traders assign less than a 5% chance that prices will again surpass $4.50 by month's end.
The speculation follows the U.S. ending its ceasefire with Iran and launching a second wave of strikes on Wednesday afternoon, as announced by U.S. Central Command on X. The strikes aim to degrade Iranian capabilities used to attack commercial shipping in the Strait of Hormuz. Oil prices have risen for three consecutive days, with WTI August futures closing at $79.60 per barrel and Brent September futures at $84.95, both up 0.3%.
Market implications
The confluence of military action in the Middle East and rising oil costs has driven the rapid shift in gas price expectations. While the odds of a $4.50 breach remain low, the current trajectory suggests consumers may face higher fuel costs in the near term.