Spending an extra $150 on fuel each month could lead to a nationwide increase in shelf prices, with nearly half of consumers starting to stockpile goods! U.S. military strikes Iran, and American citizens bear the cost.

Each Daily Reporter｜Gao Han    Each Daily Editor｜Wang Jiaqí

The attacks launched by the United States against Iran are already backfiring on the U.S. economy.

From soaring finished fuel-oil prices to rising logistics and transportation costs, from budget pressure on ordinary households’ day-to-day spending to inflation pressures that are being layered on one after another, not only are people’s cost of living being squeezed, but the U.S. economic recovery pace is also being thrown off—planting multiple hidden risks for inflation control, the Federal Reserve’s policy direction, and even the outlook for the overall economy.

Recently, the Organisation for Economic Co-operation and Development (OECD) predicted in its regular economic outlook update that the overall U.S. inflation rate will reach 4.2% in 2026, which is a significant upward revision from the earlier expectation of 2.8%. This figure is far above the Federal Reserve’s official forecast of 2.7%, and it also confirms the grim situation of a new round of inflation picking up in the United States.

According to the latest data from the American Automobile Association on March 26, the average weekly increase in U.S. gasoline prices was 10 cents, and the increase over a single month was as high as $1. Over the month, the price of gasoline per gallon jumped from $2.98 on February 26 to $3.98. As the Iran-related geopolitical conflict continues, international crude oil prices have stayed elevated. The average price of U.S. gasoline is likely to reach $4 per gallon, which would be the first time since August 2022. As the spring break season continues, gasoline demand is also rising—another factor behind higher fuel prices at gas stations.

Image source: American Automobile Association

Take a household sedan with a tank capacity of 50 liters (about 13.2 gallons) as an example. The cost of filling up one tank has risen from $39 to $52; each refueling now costs about $13 more (about RMB 90 yuan). For Americans who rely heavily on private cars for commuting, monthly fuel spending may increase by $100–$150. And in the vast, sparsely populated Midwest, where public transportation is limited, many office workers have one-way commutes of 50 kilometers or more; the impact of rising gas prices on their cost of living is even more direct.

Looking at regional pricing, U.S. gas prices are clearly diverging across states. The top ten regions with the highest gasoline prices nationwide are: California ($5.84), Hawaii ($5.33), Washington ($5.30), Nevada ($4.86), Oregon ($4.86), Arizona ($4.63), Alaska ($4.57), Idaho ($4.25), Illinois ($4.23), and Utah ($4.16).

A rise in gasoline prices affects not only people’s commuting and travel, but more directly boosts transportation and production costs across the entire industry, which ultimately gets passed on to end consumers through price transmission.

A truck driver from Ohio added up the numbers in a media interview: his heavy truck’s daily refueling costs have jumped from $140 to $207, an increase of nearly 50%.

On March 25 local time, the U.S. Postal Service (USPS) announced that, starting April 26, it would impose an 8% temporary fuel surcharge on package mailing services in order to cope with continuously rising transportation costs (including the surge in fuel prices caused by the conflict between the U.S. and Iran).

The aviation industry has also been hit hard. Since late February, aviation fuel prices have nearly doubled, and operating costs across the industry have risen sharply in a straight line. Delta Air Lines CEO Ed Bastian said that in March alone, higher jet fuel prices caused the company’s operating costs to increase by $400 million. American Airlines estimated that in the first quarter, additional spending driven by higher jet fuel prices would reach $400 million. United Airlines cut the number of regular flights directly to ease cost pressure.

Oil is the “lifeblood” of modern industry. Fluctuations in its price are transmitted through a complex industrial chain to the consumer goods market. From fertilizer on farms to packaged foods on supermarket shelves, from synthetic-fiber clothing to everyday chemical products, the impact of rising oil prices is everywhere and stacks on top of itself, forming a complete chain of inflation transmission.

An Omnisend e-commerce platform survey conducted from March 9 to 13 among 1,000 U.S. adults showed that many consumers have started taking countermeasures. About 48% of respondents said they are buying certain items in bulk because they expect prices to rise.

According to media reports, perishable foods such as dairy products, fresh fruits and vegetables, meat, and seafood are expected to be the first to increase in price. These products require temperature-controlled transportation, use far more fuel than ordinary dry-goods shipping, and are more sensitive to fluctuations in oil prices.

Cost increases in agriculture are even more severe and also directly affect the future trajectory of food prices across the United States. Data from the Center for Strategic and International Studies shows that about 35% of global urea and 20%–30% of fertilizer exports need to pass through the Strait of Hormuz.

Jo Brousuelaas, chief economist at Ryzitda, said that the price of U.S. ammonia water has risen by 41% compared with last March, and the price of urea has risen by 21%. For countries affected by transport disruptions through the Strait of Hormuz, the volume of urea exports accounts for about 49% of the global total.

The spring planting season is now fully underway across the United States, meaning farmers are purchasing and applying fertilizer in a concentrated period. Any supply disruption during this critical time could push up food prices over the coming months.

Previously, QatarEnergy also issued an announcement that, due to attacks on its world’s largest liquefied natural gas export facilities and other assets, the company paused the production of LNG and related products starting March 2. It later said it would not be able to fulfill supply contracts, and restarting capacity would take years. The affected raw materials—such as urea, polymers, and methanol—are core materials for fertilizers, plastics, detergents, and food packaging. With reduced capacity and the closure of shipping lanes, supply chain tightness is further aggravated, and industrial raw material supplies such as aluminum and helium are also affected.

Vidya Mani, an associate professor of business administration at the Darden School of Business at the University of Virginia, said bluntly that for U.S. households, the U.S.-Iran conflict is not a distant geopolitical shock; instead, it seeps into all aspects of daily life through fuel, freight, fertilizers, petrochemical products, and global factories that produce consumer goods. “If oil production, refining, and transportation facilities continue to be targeted, restoring the supply chain may take months. Ultimately, it could trigger broad-based inflation, long-term supply shortages, and longer delivery timelines for all kinds of goods such as food, packaging, electronics, and household appliances.”

Image source: Zheng Yuhang

Rising oil prices are driving end-consumer goods to rise across the board. This not only increases the burden on Americans’ daily lives, but also sparks a chain of economic reactions: inflation expectations continue to be reinforced, the Federal Reserve’s monetary policy falls into a dilemma, consumer confidence keeps sliding, and the pace of U.S. economic recovery is thoroughly disrupted.

With this round of sharply raised inflation expectations for the United States, the OECD points directly to two core drivers: first, the surge in energy prices caused by the geopolitical conflict in the Middle East; second, the continued impact of U.S. tariff policies—even if tariff levels are lowered, they still provide support for global commodity prices. The OECD also issued a warning that the Federal Reserve and central banks around the world need to remain highly vigilant to prevent inflation from continuing to heat up and spreading out of control.

Data released by the U.S. Bureau of Labor Statistics on March 26 also confirms this trend. In February, the prices of U.S. imported goods posted the largest month-over-month increase since 2022. Pressure from geopolitical conflicts stacked on top of the effects of import tariffs means companies are gradually passing related costs on to consumers. Among them, imported fuel prices rebounded by 3.8% month over month, the largest increase since April 2024. Crude oil and natural gas prices rose in tandem. Food import prices rose 0.8% month over month, and prices of vegetables, meat, oilseeds, and other categories of food rose across the board.

In addition, a survey released by the University of Michigan on March 27 showed that, affected by rising fuel prices and volatility in financial markets, the U.S. consumer sentiment index fell sharply by 6% in March, the lowest level since December 2025. The ongoing Iran war is also further worsening the situation. The survey also showed that inflation expectations for the coming year rose from 3.4% in February to 3.8% in March, the largest month-over-month increase since April 2025.

The University of Michigan specifically noted that the survey interviews for this study were conducted from February 17 to March 23, with about two-thirds completed after Feb. 28, when large-scale military actions were launched against Iran by the United States and Israel.

As inflation pressure continues to heat up, it directly disrupts the Federal Reserve’s schedule for interest-rate cuts. Of the 19 members of the Federal Open Market Committee (FOMC), 7 are expected not to cut rates this year, which is an increase of 1 member compared with the prediction in December last year.

At the press conference after the March interest-rate decision, Federal Reserve Chair Jerome Powell said that in the near term, higher energy prices will raise overall inflation, but the scope and duration of the related impact remain highly uncertain. If inflation shows no progress, there will be no rate cuts. He emphasized that monetary policy does not have a pre-set path, and decisions will be made meeting by meeting based on economic data.

Affected by uncertainty about the Federal Reserve’s policy direction and factors such as the yield on U.S. 10-year Treasury notes, the average interest rate on U.S. 30-year fixed-rate mortgages rose to 6.22%, the highest level since last December.

The real estate market is also under pressure. The spring homebuying rush, which was set to arrive in the traditional peak season, has been hindered. Joel Berna, a senior economist at Realtor.com, said, “At the end of the day, the key factor preventing the spring housing market from making full use of the current favorable inventory and price conditions is the upward pressure on mortgage rates caused by the war and inflation concerns.”

As inflation expectations continue to rise and the outlook for economic growth keeps deteriorating, multiple international financial institutions have recently raised the probability that the U.S. economy will fall into a recession within the next 12 months.

Moody’s Analytics’ latest model shows that the probability of a U.S. recession has risen to 48.6%, setting a new high in recent years. The company’s chief economist, Mark Zandi, recently said clearly: “What’s concerning is that recession risk is so high that it’s uncomfortable—and it’s still rising. An economic recession is a real threat. If today’s high oil prices continue through the end of May to the end of the second quarter, the U.S. economy will fall into a recession.”

In addition, Goldman Sachs estimates that the oil price shock triggered by the U.S.-Iran conflict will result in about 10,000 fewer new monthly jobs in the United States by the end of this year. This heavy cost will be most clearly reflected across the U.S. restaurant, hotel, and retail industries.

The transmission chain for this round of rising oil prices is clear and forceful. First, it directly raises gasoline, transportation, and manufacturing costs, thereby suppressing residents’ disposable income and corporate profits. Second, it may force the Federal Reserve to be more cautious in its pace of rate cuts, creating a concern about “stagflation.” Finally, through an amplification effect in financial markets, it leads to increased volatility in the stock market and a steeper bond yield curve.

With the U.S. labor market already showing signs of weakness, if consumer spending continues to slow afterward and the unemployment rate rises in tandem, the U.S. economy may fall into a vicious cycle, and the overall outlook for recovery will become even bleaker.

Cover image source: Economic Daily media database

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