Iran War Reshapes US Consumer Spending as Oil Prices Surge

More than three months after the United States and Israel launched military operations against Iran, the conflict has driven oil prices above $100 per barrel and is fundamentally reshaping how American consumers spend their money. From leaving gas tanks unfilled to cutting back on clothing and dining out, shoppers across the income spectrum are adapting to a new economic reality — and the adjustments are far from over.

The Oil Shock

The conflict, which began on February 28, 2026, triggered the largest oil supply disruption in modern history. The Strait of Hormuz — through which approximately 20% of the world’s daily oil moves — has been effectively closed since the start of the war, cutting off a vital artery for global energy trade. According to AP News, the resulting supply crunch has sent oil prices surging past $100 per barrel periodically, with the national average gas price hitting $4 per gallon on March 31 and climbing to $4.30 by early May.

The International Energy Agency has projected that global oil demand will shrink by 1.5 million barrels per day in the second quarter of 2026 — the sharpest drop since the COVID-19 pandemic. “Demand destruction will spread as scarcity and higher prices persist,” the IEA warned in its April Oil Market Report, signaling that this may not be a temporary adjustment but a structural shift in energy consumption patterns.

Consumers Feel the Pinch at the Pump

The most visible signs of strain are appearing at gas stations across the country. Walmart CFO John David Rainey reported that for the first time since 2022, Walmart and Sam’s Club members are buying an average of less than 10 gallons per trip. “That’s an indication of stress,” Rainey told analysts during the company’s most recent earnings call.

The National Association of Convenience Stores found that the number of pump transactions at 130 convenience store companies fell by nearly 10% across March and April 2026 compared to the same period in 2025, while in-store sales dropped by 10.4%. Consumers are increasingly shifting to warehouse clubs like Costco, Sam’s Club, and BJ’s for cheaper gas. Costco CFO Gary Millerchip noted that members are “topping up” more frequently due to price concerns.

“Gas is a kind of catalyst. It trickles down into the entire budget,” said Trevor Chapman, a California consumer, in an interview with AP News. “We’re trying to keep everything as normal as possible. But it’s starting to feel like it’s adding up more and more.”

The K-Shaped Divide Widens

Research from the Federal Reserve Bank of New York reveals that the Iran war is exacerbating economic inequality in stark terms. Households earning less than $40,000 per year increased their gas spending by just 12% in March — because they cut consumption by 7%. By contrast, households earning over $125,000 per year raised spending by 19% while cutting consumption by only 1%.

“Thus, the K-shaped consumption pattern in both nominal and real gasoline spending was strongly evident in March 2026,” New York Fed researchers wrote on the Liberty Street Economics blog. They noted the gap is “quantitatively larger” than during the 2022 Russia-Ukraine energy spike.

Energy prices have climbed 56% in the post-pandemic economy overall, according to CNBC, compounding years of inflation that had already raised consumer prices by about 28% since March 2020.

Retailers See Spending Shifts

The impact extends well beyond the gas station. Between April 25 and May 23, U.S. retailers sold 6% fewer non-grocery products than during the comparable 2025 period, according to data from Circana. Housewares, clothing, footwear, and sports equipment saw declines of 5% to 7%. Meanwhile, toys and beauty items saw at least 8% increases in units sold — a pattern analysts describe as consumers seeking “affordable luxuries” and small indulgences while cutting back on larger discretionary purchases.

Foot traffic data from Placer.ai showed four consecutive weeks of reduced visits to clothing, electronics, and home furnishing stores by early May, with more trips going to grocery stores and dollar stores. “Consumers are prioritizing value-oriented retailers like warehouse clubs, superstores, and off-price chains,” said R.J. Hottovy, head of analytical research at Placer.ai.

Dollar General CEO Todd Vasos cited $4-per-gallon gas as a tipping point that brought more consumers with household incomes above $100,000 to the discount chain. At the same time, McDonald’s CEO Chris Kempczinski said customers with household incomes of $45,000 or less are scaling back fast-food purchases.

Analysis of 14.6 billion restaurant transactions by Revenue Management Solutions found that as gasoline gets more expensive, restaurant visits gradually decline, with the impact doubling when gas hits $4 per gallon.

OPEC+ in a Bind

On June 7, OPEC Plus agreed to increase production by 188,000 barrels per day in July — the fourth consecutive monthly increase since the war began. As India.com/IANS reported, Saudi Arabia and Russia will each increase production by 62,000 barrels per day, with the remainder shared among Iraq, Kuwait, Kazakhstan, Algeria, and Oman.

However, analysts describe these increases as largely symbolic. Several OPEC+ members cannot pump more due to the Strait of Hormuz closure, and the 188,000 barrels per day increases are a fraction of the estimated 14.5 million barrels per day of Persian Gulf production lost. The cartel’s statement about retaining “full flexibility to increase, pause or reverse” reflects the deep uncertainty surrounding the conflict’s trajectory.

What Comes Next

The earnings growth rate for the S&P 500 consumer discretionary sector has already slowed from 40.4% in the previous quarter to a projected 5.2% for Q2 2026, according to LSEG data. Retailers typically book 50-60% of annual revenue in the second half of the year, spanning back-to-school through Christmas. Analysts warn that persistently high gas prices through the summer could pressure discretionary spending during this crucial period.

“Uncertainty, however, is rising as the long-term effect of the Iran war on the economy is unknown,” noted analysts at Telsey Advisory Group.

Walmart CFO John Rainey struck a cautiously optimistic tone: “There’s certainly nothing to panic about right now. But when you dig into the details, you can see that the pressure is a little bit uneven, and so it’s something that we’re keeping our eye on.”

As Catherine Wolfram, a professor of energy economics at MIT Sloan, observed: “The longer the supply shock goes on, the more it’s not a shock.” The question now facing economists, retailers, and policymakers is whether the behavioral changes taking root in American households will persist — and what that means for an economy already navigating the fault lines of a K-shaped recovery.