Iran War Pushes Gas Above $4 in Every State, Fed Hikes Loom

The third month of the war with Iran is now showing up in every American economic data series, and on May 20 the bill arrived all at once.

AAA said every U.S. state and the District of Columbia is paying an average of more than $4 a gallon for regular gasoline, with seven states above $5. The national average stands at $4.56, up 53% since the war began on Feb. 28. California posted the highest price at $6.15; Georgia was the cheapest at $4.01; California, Washington, Oregon, Nevada, Hawaii and Alaska all sat above $5 by Wednesday afternoon. GasBuddy analyst Patrick De Haan said the average could break the all-time $5.03 record if the Strait of Hormuz remains closed through mid-summer. Speaker Mike Johnson (R-La.) reiterated his concern over fuel prices on Sunday, saying "all points lead back" to the strait, while President Trump's proposal to pause the federal gas tax met resistance from senior Republicans wary of the deficit hit.

The same fuel-price spike is now visible in two other May 20 indicators. The Bureau of Labor Statistics' April grocery-price reading came in at 2.9% year-over-year, the highest since August 2023, with tomatoes up 40% and coffee sharply higher; the data point ties grocery inflation directly to Hormuz disruption, tariffs and weather. April small-business profitability fell 1.3% — the biggest drop in two years — as gasoline costs ran 43% higher year-over-year and small employers spent 31% more on fuel. The cumulative picture is what the Federal Reserve's April 28–29 minutes, also released on May 20, dwelt on: a majority of officials now believe the central bank may have to raise rates if Iran-war inflation persists. Incoming Chair Kevin Warsh inherits a bond market in which the 30-year Treasury yield has surged to 5.11%, the highest since 2007, driven by energy-supply disruption, AI-related capital demand and the fiscal outlook; President Trump, who had attacked Jerome Powell for not cutting rates, signalled tolerance for Warsh making the call.

On the war itself, the diplomatic track moved sideways. President Trump and Israeli Prime Minister Benjamin Netanyahu held a tense phone call on Tuesday over a revised peace memo drafted by Qatar and Pakistan, with one source describing Netanyahu as having his "hair on fire" over its contents. Tehran's army separately threatened to "open new fronts" beyond the region if attacked again, even as Trump said talks with Iran were in their final stages but he was "in no hurry"; global outrage mounted at a video posted by Israeli National Security Minister Itamar Ben-Gvir taunting Palestinian detainees during the flotilla interdiction. The New York Times reported separately on a U.S.–Israeli regime-change planning exercise that had floated installing former Iranian president Mahmoud Ahmadinejad as a potential successor, with the plan reportedly contemplating his removal from house arrest.

Two corporate stories cut against the gloom and provided the day's other headline numbers. SpaceX filed publicly for an initial public offering on Nasdaq under the ticker SPCX, targeting a record $1.75 trillion valuation; disclosures showed $18.67 billion in 2025 revenue and a $2.6 billion operating loss, with Starlink as the main growth engine. Nvidia beat Q1 revenue forecasts on AI infrastructure demand, with CEO Jensen Huang describing the buildout of AI factories as "the largest infrastructure expansion in history" and signalling sustained data-center capital expenditure through 2026. The two filings reinforce the dynamic the Fed minutes flagged: AI-driven private capital demand is competing for the same scarce balance-sheet capacity that war-driven government borrowing is now claiming, and that interaction is structurally why long-end yields keep rising even as headline inflation drifts down.