Will Gas Prices Go Down This Summer? The Iran Ceasefire Just Fell Apart
Quick Answer
The U.S. Energy Information Administration forecast that gas prices would fall to a summer average of about $3.80 a gallon in the third quarter of 2026, down from over $4.20 in the spring. That forecast, published July 7, assumed the U.S.-Iran ceasefire signed on June 18 would hold and oil production would keep recovering.
It didn't hold. On July 7-8, hostilities resumed, and AAA's own data shows the national average has already reversed course and started climbing again after weeks of decline. Whether the EIA's $3.80 forecast still holds depends entirely on what happens next in a conflict that remains unresolved.
Written by Morgan Ellis, Editor at GearUp Insights | About the Editor | Last reviewed: July 2026
The Timeline: From Ceasefire to Reversal in Three Weeks
Gas prices in 2026 have moved in three distinct phases, and understanding where we are in that sequence matters more than any single headline number.
| Date | What Happened | AAA National Average |
|---|
| Feb 26, 2026 | Just before the conflict began | $2.96 |
| May 21, 2026 | Wartime peak, ~12 weeks into the conflict | $4.56 |
| Jun 18, 2026 | U.S.-Iran ceasefire memorandum of understanding signed | — |
| Jul 3, 2026 | Prices had fallen steadily for weeks post-ceasefire | $3.83 |
| Jul 7-8, 2026 | Ceasefire effectively breaks down; renewed strikes reported in the Gulf | — |
| Jul 9, 2026 | AAA reports prices rising overnight for the first time in weeks | $3.84 (+5¢ overnight) |
Source: AAA daily and weekly national average data, AAA Newsroom press releases.
The magnitude of the reversal is still small in dollar terms—a nickel overnight is not a crisis. What matters is the direction changed, and it changed right after the ceasefire cracked. AAA's own July 9 release was titled, plainly, "Gas Prices Reverse Course and Start Rising Again."
Why the EIA's Forecast Is Now in Question
The EIA's Short-Term Energy Outlook, released July 7, 2026, built its summer forecast on a specific assumption: that the June 18 ceasefire would hold, oil production disrupted by the conflict would keep recovering toward pre-war levels, and shipping through the Strait of Hormuz would keep normalizing.
Under that assumption, the EIA projected:
- Brent crude averaging $74 per barrel in the third quarter of 2026, down $27 from the prior month's outlook
- U.S. gasoline averaging $3.80 per gallon in Q3 2026, down from more than $4.20 in Q2
- Continued softening into 2027, with Brent averaging around $65
That forecast is now built on an assumption that didn't survive the week it was published. The International Energy Agency's July Oil Market Report notes that benchmark crude prices, which had fallen to around $68 a barrel in early July—their lowest since January—rose again after the ceasefire was breached on July 7-8, trading back around $77 a barrel. The IEA explicitly flagged that the escalation "clouds the outlook" for the rest of the year.
None of this means the EIA's forecast is wrong. It means the forecast is conditional, and the condition it depended on has already failed once.
GearUp Takeaway
Treat any summer gas price forecast right now as a range, not a number. $3.80 a gallon is the case where diplomacy holds. Something closer to the spring's $4.20–$4.56 range is the case where it doesn't. Budget for the wider range, not the optimistic point estimate.
What This Means for Your Driving Budget
For a driver covering 1,200 miles a month in a 30-mpg gas vehicle, the difference between $3.80 and $4.50 a gallon works out to roughly $28 more per month, or about $340 a year. That's not catastrophic on its own, but it compounds with everything else that's gotten more expensive this year—financing costs, insurance, and the now-expired federal home charger tax credit among them.
It's also a reminder of the core trade-off between gas, hybrid, and electric ownership: gas prices can move 15-20% in a matter of weeks based on events an individual driver has zero control over, while home electricity rates move far more slowly and predictably. That doesn't make an EV or hybrid automatically cheaper overall—purchase price, insurance, and access to home charging still matter—but it does mean the fuel-cost side of the ledger is inherently more volatile for gas vehicles right now than it has been in years.
For a deeper look at how that volatility gap has played out this year, see Gas Prices Swung 53% in 10 Weeks. Your EV Charging Bill Didn't Move. For the full ownership-cost comparison across gas, hybrid, and EV, see Electric vs. Gasoline: The Complete 2026 Total Cost of Ownership Analysis.
What to Watch Next
- Whether shipping through the Strait of Hormuz normalizes or stays disrupted. The IEA reports Gulf export refineries and product loadings are still running well below pre-war levels even when crude flows partially recover.
- The EIA's next Short-Term Energy Outlook, due August 11, 2026, which will show whether the agency revises its $3.80 forecast in light of the July breakdown.
- AAA's weekly national average, which is the fastest-moving real-world signal of whether this is a brief reversal or the start of a new upward trend.
Our Take
Forecasts are built on assumptions, and the honest version of this story is that the assumption broke before the ink on the forecast was dry. That's not a knock on the EIA—nobody can price in a ceasefire holding or failing with certainty. It's a reason to hold summer gas-price predictions loosely and check back often, especially if you're deciding right now between a gas car, a hybrid, and an EV based on how much you expect to pay at the pump in August.
Sources
- U.S. Energy Information Administration, Short-Term Energy Outlook, July 7, 2026 — eia.gov/outlooks/steo
- AAA Newsroom, "Gas Prices Reverse Course and Start Rising Again," July 9, 2026 — gasprices.aaa.com
- AAA Newsroom, "Ahead of July 4th, Drivers Get Some Relief at the Pump" — gasprices.aaa.com
- International Energy Agency, Oil Market Report, July 2026 — iea.org
- AAA daily and state gas price averages — gasprices.aaa.com
This article is for educational purposes only and is not financial advice. Prices and forecasts referenced are current as of July 13, 2026, and will change as the underlying situation develops.