Gas prices on LI increased last month, but U.S. inflation cooled more than expected

Gasoline prices on Long Island and in the metropolitan area rose 33.8% last month overall compared with a year ago, the fourth double-digit increase since March.

The high pump prices led to persistently high inflation overall in both the New York area and nationwide in June, though the rate of increase in the consumer price index was slower than in May. The index was released on Tuesday by the federal Bureau of Labor Statistics.

The on-again, off-again war with Iran, which has disrupted oil production and transportation for more than 120 days, is behind the increased cost of gasoline, experts said. The conflict began on Feb. 28 with the United States and Israel bombing Iran.

Gasoline prices dropped after a ceasefire was announced in mid-June, but have since risen with the agreement falling apart in the past two weeks.

On Long Island, the average price of a gallon of unleaded on Tuesday was $3.92. Between June 1 and June 30, the price went from $4.41 to $3.93, according to AAA.

Economists said pump prices were the main cause of the price index for the 25-county region that includes Nassau and Suffolk counties rising 4.1% last month compared with June 2025. That was a full percentage point slower than May’s 5.1%.

The change offered “a little bit of relief but no reprieve” for local consumers, said John A. Rizzo, an economist and Stony Brook University professor.

“The things families can’t cut are still climbing fastest: rent is up 4.2%; groceries, 4%; and [household] energy 16.2% over the last year,” he told Newsday. “Until paychecks start outrunning those core costs, most consumers won’t feel like they’ve caught up.”

Rizzo and others said when consumers are hard pressed they reduce their spending, which impacts economic growth. About 70% of economic activity on Long Island and nationwide is derived from consumer spending.

Gasoline isn’t the only commodity whose price rose in June.

The cost of non-alcoholic beverages climbed 7.6% last month compared with June 2025. Fruits and vegetables were up 7% and restaurant meals were up 3.2%, respectively, according to the statistics bureau.

Nationally, consumer prices rose 3.5% in June compared with a year earlier. They rose 4.2% in May.

Excluding the food and energy categories, core prices climbed just 2.6% in June, year over year, down from 2.9% the previous month. Core inflation remains above the Federal Reserve’s target of 2% for determining changes to interest rates.

The core figures suggest that the gas price spike from the Iran war, while it pushed up airfares and some other costs, hasn't so far led to broad-based, sustained inflation, economists said.

“This reading is very much in the camp that the inflation we've had this year is transitory,” said Michael Metcalfe, head of macro strategy at State Street Markets.

Yet oil prices rose for a second day Tuesday as the United States renewed attacks on Iran and President Donald Trump announced a new blockade in the Strait of Hormuz, a key shipping route for about one-fifth of the world’s oil. The increase threatens to undo at least some of the progress that occurred last month.

And many Americans have soured on the economy after five years of elevated inflation, posing a risk to Trump and Republicans in the upcoming midterm elections.

Tuesday's price index report likely reduces pressure on the Fed to boost its short-term interest rate to combat inflation. Last month, Fed officials left their key rate unchanged at about 3.6%.

Fed Chair Kevin Warsh, in written testimony to the House Financial Services Committee, said Tuesday that the Fed has “no tolerance” for high inflation which he pledged would become “a thing of the past.” Yet he provided no hints about what steps the Fed may take in coming months.

The situation in the Middle East continues to change hour to hour. On Tuesday, the price for a barrel of Brent crude oil, the international standard, climbed 4.6% to $87.13 after the United States and Iran each said the Strait of Hormuz is under its control. Gas prices have also risen about 6 cents a gallon in the past week, to a nationwide average of $3.86 a gallon.

“Today’s number is a very good reading, but so much is going to depend on what happens in the Middle East," Kathy Bostjancic, chief economist at Nationwide Financial, said.

The Associated Press contributed to this story.