War Could Push Up More Than Just Gas Prices

Key Takeaways

• Prices for food, consumer products, airline tickets, and just about everything else could get more expensive in the coming months if the Iran war drags on.
• The spike in gas prices since the war began is likely to stoke inflation because fuel costs factor into most things people buy.
• The price hikes will be worse the longer the war goes on, economists said.

You’ve seen the war-related surge in prices at the gas pump—expect to see price increases just about everywhere else before too long.

The 60-cent-per-gallon jump in gasoline prices since the war began is just the beginning, economists warned this week.

The war in Iran has restricted sea traffic through the critical Strait of Hormuz, choking off about 20% of the world’s oil supply and causing prices to spike. That’s translated into higher gas and, especially, diesel fuel costs. Diesel was $4.81 a gallon Wednesday, up $1.07 since March 1, Patrick DeHaan, head of petroleum analysis at Gasbuddy, posted on social media.

A surge in fuel prices isn’t just a surge in fuel prices. It can push up costs for everything that’s delivered by truck or uses vehicles and machinery, which, in the U.S., is just about everything.

What This Means For The Economy

Some forecasters say oil would have to reach $130 a gallon and stay there to drag the economy down into a recession—as of Wednesday it was hovering under $90.

“Diesel powers trucks, farms, and construction,” DeHaan wrote. “Spikes like this ripple through the entire economy.”

Air travel will likely get more expensive in the coming months, forecasters at Pantheon Macroeconomics said in a commentary. Fuel is a major cost for airlines, accounting for about a quarter of their total expenses in 2019, according to the International Air Transport Association. As of March 6, jet fuel was up 64% compared to the previous month, the association said.

It won’t belong before those higher prices start squeezing household budgets, eventually leading people to cut back on spending, Sean Snaith, director of the University of Central Florida’s Institute for Economic Forecasting, wrote in a commentary.

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“Energy costs show up everywhere, at the gas pump, in shipping costs and eventually in the price of goods,” he wrote. “Many middle- and lower-income households are still repairing their budgets after several years of high inflation. Higher energy prices make that recovery harder.”

As with many aspects of the war, the damage will be less the sooner it ends.

“If energy price increases remain contained and the conflict does not significantly disrupt global supply, the broader trend of moderating goods inflation is likely to continue through 2026," wrote Ralph McLaughlin, chief economist at market intelligence company OpenBrand, in a commentary. "But a prolonged or escalating conflict that drives oil substantially higher would pose a renewed upside risk to overall inflation.”

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