Gas Prices Hit Four-Year High as Peace Talks Offer Glimmer of Hope

The national average price of gasoline in the United States has just topped $4.50 per gallon, the highest level since the middle of July 2022, according to data from GasBuddy , as the Iran war continues to strain global fuel supplies. But there's a twist: markets reacted sharply to an Axios report that the U.S. and Iran were close to an agreement that would bring their two-month war to an end, with Washington expecting responses from Tehran on several key points to form the basis of a one-page memo within the next 48 hours .

Gasoline futures plummeted to $3.35 per gallon on Wednesday after reaching a four-year high of $3.75 two sessions prior, as reports indicated that the US was close to agreeing on a memorandum to end the conflict with Iran, which would likely start the process of restoring tanker flows through the Strait of Hormuz . According to market data, WTI crude traded at $71.50 per barrel on Tuesday, up 0.6%, while Brent crude stood at $75.20 per barrel, up 0.5%.

Project Freedom Paused Amid Diplomatic Progress

The diplomatic breakthrough came after a tense 48 hours that saw President Trump launch and then pause "Project Freedom," a military operation designed to escort stranded commercial vessels through the Strait of Hormuz. President Donald Trump said he is pausing "Project Freedom," the U.S. military's bid to guide commercial ships out of the Strait of Hormuz , citing progress on peace negotiations.

The Trump administration has said that nearly 23,000 sailors on vessels representing 87 countries have been stranded in the Persian Gulf because of Iran's de facto closure of the Strait of Hormuz, with Secretary of State Marco Rubio saying at the White House that the goal of Project Freedom is to "rescue" those sailors, who have been "left for dead" by the Iranian regime .

The International Maritime Organization (IMO) estimates that up to 20,000 seafarers are stranded on board roughly 2,000 vessels in the Gulf near the Strait of Hormuz, and has recorded at least 19 attacks on vessels, killing 10 seafarers and injuring eight, while warning that many ships are running critically low on food, fuel and water .

Oil Reserves Plunge to Eight-Year Low

The supply crunch is real and getting worse. Goldman Sachs warns global oil inventories have dropped to 101 days of demand, near an 8-year low, as Strait of Hormuz tensions accelerate the depletion of refined product stocks . Even more concerning, refined product stocks have been depleting even faster, with fuel stocks now down to 45 days of demand, from 50 days of demand before the war in the Middle East began .

The Financial Times reported that global oil reserves are plunging at a record pace as the Middle East war strains supplies, with stocks near an eight-year low ahead of the summer travel season. Attacks on energy infrastructure and shipping disruptions in the Strait of Hormuz, which handles about 35% of global seaborne crude oil trade, have triggered the largest oil supply shock on record, with an initial reduction in global oil supply of about 10 million barrels per day, according to the World Bank, with Brent oil prices remaining more than 50% higher in mid-April than they were at the start of the year .

US gasoline stocks sank for the 11th straight week, depleting inventory ahead of the high-demand summer season , creating a perfect storm for motorists already struggling with affordability.

Natural Gas Futures Slide on Peace Hopes

Natural gas markets are also responding to the diplomatic developments. Natural Gas Intel reported that after slipping the previous session, natural gas futures declined further in early Wednesday trading, taking their cues from global oil and LNG benchmarks on reports that the United States and Iran are nearing an agreement to end the war . According to market data, Henry Hub Natural Gas traded at $3.25/MMBtu on Tuesday, down 2.4%.

Chevron's top executive said "all the big pistons in the engine are firing," and momentum is building in the second quarter as the supermajor provides steady natural gas and oil supply to tight global markets, according to Natural Gas Intel . The company reported that its LNG output is running at full capacity as demand builds in what remains a constrained global market.

AI Boom Adds New Pressure to Power Grid

While geopolitical tensions dominate headlines, a quieter but equally significant energy story is unfolding: the explosive growth in data center power demand driven by artificial intelligence. Electricity demand from data centres soared by 17% in 2025, and that of AI-focused data centres climbed even faster – well outpacing growth in global electricity demand of 3%, according to the IEA .

Data centers accounted for 17% of electricity demand growth worldwide last year, according to the IEA report, compared with around 50% in the U.S., as the country's tech giants have gone full steam ahead on data center construction in recent years . The implications for energy infrastructure are staggering.

US data center capacity is expected to scale from roughly 24 GW to 100 GW between 2026 and 2030, increasing competition with utilities for the same pool of electrical equipment, according to Wood Mackenzie . This surge is creating bottlenecks throughout the power supply chain, with substation transformer lead times stretched from roughly 140 weeks in 2023 to more than 160 weeks in 2026 .

Mining Technology reported that AI is driving a surge in data center power demand, with rising rack densities, grid constraints, and evolving infrastructure reshaping power distribution for next-generation workloads. The convergence of geopolitical energy shocks and AI-driven electricity demand is creating unprecedented challenges for grid operators and energy planners worldwide.

What Comes Next

The energy markets remain on edge, caught between hope for a diplomatic resolution and the reality of severely depleted inventories. Axios reported that the deal would involve Iran committing to a moratorium on nuclear enrichment, the U.S. lifting sanctions on Iran and both parties retreating from controls on ship transits through the Strait of Hormuz , though many terms remain contingent on a final agreement.

Shipping activity through Hormuz has been halted since the start of March, disrupting 20 million bpd of oil and refined products for major importers . Even if peace talks succeed, restoring normal flows through the strait will take time, and the summer driving season is already upon American consumers facing prices just $0.50 below the all-time high set in June 2022.

For now, energy markets are trading on hope—hope that diplomacy can succeed where military pressure has failed, and hope that stranded sailors and vessels can finally make it home.