How the Iran War is Impacting US Gas Prices and Economy

American households have now absorbed nearly US$450 in additional energy costs since the US instigated war with Iran in late February, according to analysts from Moody's Analytics.

The figure – US$447.19 per household on average – translates to a cumulative burden of close to US$60bn across the country, driven by sharp increases in the price of petrol, diesel and jet fuel over three months of conflict.

Mark Zandi, Chief Economist at Moody’s, has warned that the situation could get far worse if the fighting continues.

"Unless the war ends soon, financially pressed consumers will have no option but to turn more cautious in their spending, threatening the already soft economy," he said, speaking with CNBC.

Were energy prices to remain at current levels through February 2027, the average household could face a total additional cost of nearly US$2,000.

At a time when many Americans are already dealing with a crisis of affordability, such a scenario would be difficult to stomach.

Prices at the pump

The primary driver of the increased burden is petrol.

Roughly half of the additional household expenditure since the conflict began stems from higher gasoline prices, which stood at an average of US$4.39 per gallon for unleaded fuel as of late May, representing a rise of more than 47% since the start of March, according to data from motoring organisation AAA.

The scale of that price spike increase varies significantly from state to state, and even county to county.

An NBC News analysis of AAA county-level pricing data showed that Kingsbury County in South Dakota recorded the highest increase in the country, with petrol up 87% to US$4.57 per gallon since the war began, an increase of US$2.13.

At the other end of the scale, Whitley County in Indiana saw prices rise by just 73 cents per gallon over the same period.

State-level policy has also played a role in containing costs in some areas: Georgia suspended its 33 cents per gallon state fuel tax in mid-March, helping keep its average price increase to US$1.18, the second-lowest in the nation.

Illinois, by contrast, recorded the steepest state-level rise in the US, with average prices up US$1.84 per gallon.

How has the conflict affected diesel and jet fuel prices?

Beyond petrol, the conflict has pushed up the cost of diesel sharply.

Diesel, which is used widely in haulage, delivery vehicles and shipping, has also become far more expensive. The price of diesel has risen by approximately 47% since early March to around US$5.52 per gallon.

As a result, American consumers are now paying an additional US$20bn for the fuel, making it the single largest component of the overall energy cost increase after petrol.

Airline passengers have not been spared either, with rising jet fuel costs contributing nearly US$10bn in additional consumer expenses.

Fares in April were more than 20% higher than a year earlier, according to federal inflation data.

Savings are depleting, debt is rising

The financial squeeze is beginning to show on consumer balance sheets.

The personal savings rate fell to 2.6% in April, one of its lowest readings since the global financial crisis, as households continue to draw down reserves built up during the pandemic era.

American credit card debt reached US$1.25tn in the first quarter of 2026, up close to 6% year on year and approaching the all-time record set at the end of 2025, according to the New York Federal Reserve.

Gregory Daco, Chief Economist at EY-Parthenon, described the dynamic in plain terms to CNBC.

"Consumers are increasingly facing an income squeeze, which is forcing them to use savings, credit and wealth to sustain their spending patterns," he says.

Personal income growth came in flat in April, missing economists' consensus forecast of a 0.4% increase.

Goldman Sachs has projected that elevated energy prices will continue to "erode" consumers' spending power through the rest of 2026, with lower-income households – which spend a proportionally larger share of their budgets on food and energy – expected to feel the effects most acutely.

How companies are experiencing this trend

The strain is beginning to surface in corporate commentary.

Costco reported "record-breaking" petrol volumes at the close of its most recent fiscal quarter, as drivers sought out the wholesaler's competitively priced fuel.

McDonald's CEO, Chris Kempczinski, warned this month that consumer spending among lower-income groups "may be getting a little bit worse" as energy costs continue to bite.

Moody's analysis also noted that the energy cost increase has more than wiped out the estimated US$384 per household benefit from larger tax returns under President Donald Trump's fiscal legislation, with Mark noting that most of the gains from those tax measures have already been used up.