US gasoline futures declined toward $3.00 per gallon on Tuesday as an Iran-Israel ceasefire unwound the prior session's risk premium, though a constrained Strait of Hormuz, rising inventories, and heavy SPR draws kept the Supply outlook complex.

Key Highlights

  • US gasoline futures fell toward $3.00 per gallon on Tuesday, surrendering most of the previous session's gains.
  • An Iran-Israel ceasefire agreement removed the immediate conflict premium that had briefly lifted prices on Monday.
  • The Strait of Hormuz remains under a dual blockade involving Iran and the United States, constraining regional distillate exports.
  • US gasoline inventories rose by more than 3 million barrels in the final week of May, ending a 15-week consecutive decline.
  • Draws of approximately 8 million barrels each from private crude stocks and the Strategic Petroleum Reserve tempered the supply improvement.

Ceasefire Reverses Monday's Risk Premium

US gasoline futures retreated toward $3.00 per gallon on Tuesday, giving back the bulk of gains recorded in the prior session. The Reversal followed an agreement between Israel and Iran to halt mutual attacks after a surge in hostilities earlier in the week.

Israeli Prime Minister Benjamin Netanyahu confirmed that Israel was suspending strikes on Iran while reserving the right to retaliate should Tehran resume aggression. Iranian media conveyed a parallel position. The exchange represented a de-escalation from the acute confrontation that had briefly pushed energy prices higher on Monday, and markets moved swiftly to unwind the risk premium built on the back of that flare-up.

The ceasefire also kept open the possibility of broader diplomatic engagement toward a more durable resolution. Active negotiations remain in progress, and President Donald Trump has described a deal as approaching its final stages. No formal agreement has been confirmed, and the situation retains the capacity to deteriorate rapidly, but the immediate pressure on prices eased as the ceasefire appeared to hold through the session.

Hormuz Blockade Continues to Constrain Distillate Supply

Despite the diplomatic softening, the structural supply constraint at the Strait of Hormuz remains firmly in place. The waterway is operating under a dual blockade, with Iran limiting commercial traffic and the United States maintaining a naval presence that has further reduced the movement of vessels. Regional distillate exports, which flow through Hormuz toward Asian and European markets, have been sharply curtailed since the conflict began in late February.

The constraint is particularly relevant for gasoline and refined product markets because the Middle East is a significant source of distillate supply for global trade flows. A partial or full reopening of Hormuz would represent a meaningful addition to available supply and would likely push gasoline futures lower. Until that happens, the blockade continues to act as a structural floor beneath prices even as geopolitical risk premiums fluctuate session to session.

Inventory Data: A Build Beneath the Surface

The weekly inventory picture added nuance to the supply narrative. US gasoline stockpiles rose by more than 3 million barrels during the final week of May, ending a 15-week consecutive drawdown. The build was larger than typical for the period and suggested that Demand may have softened relative to refinery output, at least temporarily.

However, the headline improvement in gasoline stocks was accompanied by significant draws elsewhere in the supply chain. Private Crude Oil inventories fell by approximately 8 million barrels over the same period, and the Strategic Petroleum Reserve recorded a draw of a similar magnitude. The SPR has been deployed repeatedly as an emergency buffer since the Hormuz disruption began, and continued draws at that pace raise questions about how much cushion remains available if the supply constraint persists into the summer demand peak.

The net picture is one of shifting inventory composition rather than genuine supply ease. Gasoline stocks improved at the retail end of the chain while Upstream crude buffers continued to erode, a configuration that limits how much comfort the headline build provides to the broader supply outlook.

Conclusion

Gasoline futures pulled back toward $3.00 per gallon on Tuesday as the Iran-Israel ceasefire removed the immediate risk premium that had lifted prices the previous day. The Strait of Hormuz remains blocked and regional distillate exports continue to be curtailed, providing a structural floor beneath prices. A one-week inventory build in gasoline offered modest supply relief but was offset by steep draws from crude stocks and the SPR. The market remains finely balanced between diplomatic progress and a supply chain that has been under sustained pressure since late February.