Prediction markets see gas hitting $5 again? Traders bet $4.80 is the new ceiling

Gas prices are creeping up again and Wall Street is watching closely to see if drivers will face sticker shock at the pump. U.S. oil prices have surged past $100 per barrel, pushing gasoline to multi-month highs. However, the smart money is not just looking at current numbers. Traders on prediction market platforms like Kalshi are betting where prices will go next. These market participants see a high probability of sustained pain at the pump. Specifically, traders think there is a 71 percent chance the average gas price will surpass $4.60 this year. The odds of hitting $4.80 are even higher at 57 percent. There is a strong chance we see prices top $5 per gallon again. In fact, gas prices last hit a record high of just over $5 per gallon in June 2022. AAA's data shows gas prices peaked at $4.56 per gallon on May 21. That was before traders started betting on a stronger rally.

This uptick isn't happening in a vacuum. Tensions between the United States and Iran have escalated recently. This puts the flow of oil through the Strait of Hormuz in doubt. The Strait is a critical passageway for the global supply of oil. These supply worries are pushing the commodity price higher. On Monday, West Texas Intermediate crude futures rose by 3.5 percent to more than $103 per barrel. Analysts say this volatility is a clear signal to budget for higher costs.

Another factor driving these bets is the timing of the next price move. Traders on Kalshi also think higher oil prices will last for longer. They place 50-50 odds that gas prices will be above $4.25 per gallon on election day, Nov. 3. This suggests drivers should prepare for potential volatility before the polls close. It is worth noting that CNBC and Kalshi have a commercial relationship that includes customer acquisition and a minority investment.