AAA’s national average for a gallon of regular gasoline fell to $3.999 on Thursday, dropping below $4 for the first time since the war began in late February, as crude oil tumbles on the interim U.S.-Iran peace deal. The milestone caps a steady decline that has now run for several weeks and offers tangible relief to drivers in the heart of the summer travel season.

The pullback tracks the collapse in crude. WTI fell to about $75.83 a barrel Thursday and Brent to $78.41, down sharply from the mid-$80s just a week earlier and from above $100 at the peak of the conflict. Because retail gasoline lags the futures market by one to two weeks, a substantial portion of the recent crude decline has yet to reach the pump — meaning the national average is likely to fall further in the days ahead as the Strait of Hormuz reopens.

Diesel, a key cost input for freight and agriculture, eased to a national average of $5.129. The distillate premium remains wide by historical standards, a lingering mark of the war’s disruption to refining and middle-distillate supply, but it too has been grinding lower as crude retreats and the supply outlook improves.

State-level prices continue to span a wide range. Indiana is the cheapest market in the country at $3.40 a gallon, with Texas ($3.49), Oklahoma ($3.51), South Carolina ($3.58), and Tennessee ($3.59) also among the lowest. California remains the most expensive at $5.64, followed by Washington ($5.44), Hawaii ($5.57), and Oregon ($4.92). The roughly $2.24 gap between the cheapest and priciest states reflects the usual mix of taxes, fuel-blend requirements, and refining and distribution costs.

The trajectory from here is firmly lower, barring a breakdown in the peace deal. A fully reopened Strait of Hormuz would return disrupted Gulf supply to a market the IEA already expects could swing into surplus by 2027, pressuring crude and, with it, the pump. The main risk to the outlook is the unresolved Lebanon front, where Iran has warned that an Israeli move would violate the agreement — the kind of flare-up that could halt or reverse the relief.

For now, sub-$4 gasoline marks a psychological turning point. The national average had pushed to four-year highs above $4.50 during the spring as the Strait of Hormuz stayed shut; its return below $4 signals that, for drivers at least, the worst of the war’s energy shock has passed.

Continuing coverage: Gas Prices by State · Oil Prices · Geopolitics.