War May Drive Up More Than Just Fuel Costs

Main Points

• If the conflict in Iran continues, the cost of food, everyday goods, airline fares, and many other items is expected to climb in the near future.

• Rising gasoline prices since the onset of the war are likely to fuel inflation, as energy expenses are embedded in most products and services.

• According to economists, the longer the conflict persists, the more severe these price increases will become.

While you may have already noticed higher prices at the gas station due to the war, similar increases are likely to spread to a wide range of goods and services soon.

Economists cautioned this week that the recent 60-cent-per-gallon rise in gasoline prices is only the start.

Impact of the Iran Conflict on Energy and Prices

The ongoing war in Iran has disrupted shipping through the vital Strait of Hormuz, restricting about one-fifth of the global oil supply and driving up prices. This has led to increased costs for both gasoline and diesel. As reported by Patrick DeHaan from Gasbuddy, diesel prices reached $4.81 per gallon on Wednesday, a jump of $1.07 since March 1.

Higher fuel prices have far-reaching effects, raising the cost of transporting goods and operating vehicles and machinery—essentially impacting nearly every sector in the U.S. economy.

Economic Consequences

Some analysts believe that oil prices would need to hit $130 per barrel and remain there to trigger a recession; as of Wednesday, prices were just below $90.

“Diesel is essential for trucks, agriculture, and construction,” DeHaan noted. “Sharp increases like this affect the entire economy.”

According to Pantheon Macroeconomics, airfare is also expected to rise in the coming months. Fuel is a significant expense for airlines, making up around 25% of their costs in 2019, based on data from the International Air Transport Association. As of March 6, jet fuel prices had surged 64% compared to the previous month.

Sean Snaith, director at the University of Central Florida’s Institute for Economic Forecasting, warned that these escalating costs will soon put pressure on household finances, potentially causing consumers to reduce their spending.

“Energy expenses are reflected everywhere—from the gas station to shipping fees and ultimately in the price tags of goods,” Snaith explained. “Many families, especially those with moderate or lower incomes, are still recovering from years of high inflation. Rising energy costs make that recovery even more challenging.”

The extent of the economic fallout will depend on how quickly the conflict is resolved.

Ralph McLaughlin, chief economist at OpenBrand, commented, “If energy price increases are limited and the conflict doesn’t cause major global supply disruptions, the trend of easing goods inflation could persist through 2026. However, a drawn-out or intensifying war that sends oil prices much higher could reignite broader inflation risks.”