With the ongoing conflict in Iran, consumers are bracing for more financial strain as oil prices climbed over $100 a barrel recently due to increased fighting and military actions in the Middle East that have disrupted global oil supplies.
This spike in prices marks a shift from the brief decrease seen in June when tensions between the U.S. and Iran cooled down. The last time Brent crude oil prices hit the $100 mark was back in May.
Businesses that produce and sell various goods, from fresh produce to school supplies, have already started to notice cost increases due to the rise in energy prices following military strikes on Iran. It’s likely these companies will start passing these costs down to consumers.
“Typically, when costs go up, companies raise prices quickly,” remarked Miguel Gomez, head of Cornell University’s Food Industry Management Program. He added, though, that “reducing prices takes longer once costs drop.”
Let’s explore how these rising oil prices could further impact what consumers pay.
Drivers Are Paying More for Gas
Instability in places like the Strait of Hormuz is expected to keep pushing crude oil prices upward, and consequently, gasoline prices, especially as summer continues. According to the auto club AAA, the average price for regular gasoline in the U.S. has reached $4.09 a gallon, which is a 15-cent increase from the previous week.
“Given the usual delays in the oil supply chain, we can expect pump prices to keep rising for at least another week,” noted Pavel Molchanov, an analyst at Raymond James. He did mention, however, that futures prices for oil scheduled for delivery later this year have decreased, hinting that prices might drop after military actions cease.
Interestingly, despite gas prices climbing, Americans are still driving quite a bit. In fact, last week saw a 1% increase in gasoline demand, reaching 8.9 million barrels per day, as reported by the U.S. Energy Information Administration.
The number of refineries processing crude oil has decreased since the onset of the conflict, which is likely to keep gasoline prices elevated. Damage to refineries in the Middle East and Russia has compounded the crisis.
Shoppers Are Paying More for Grocery Bags
Typically, food prices rise in line with oil prices. This is primarily because many food items are delivered by fuel-powered trucks, and farmers utilize diesel fuel for their machinery.
“While an oil price of $100 won’t cause an immediate surge in food prices, it will certainly exert upward pressure on the entire food supply chain, especially for items that depend heavily on trucking, cold storage, and packaging,” explained Gomez. Fresh produce and dairy could be more severely impacted due to their refrigeration needs.
Imported products are also at risk from soaring transportation costs. “Items like olive oil, largely imported from Europe, will see price hikes,” Gomez pointed out.
Grocery chain Albertsons has recently revised its 2026 financial outlook downwards, attributing this change to pressures on its grocery business combined with decreasing consumer spending.
Every Product That Moves Has Higher Costs
Escalating shipping costs are likely going to be pushed onto consumers and businesses that depend on shipping. Delivery services like UPS and FedEx have already implemented fuel surcharges due to rising fuel costs.
Truckload prices have surged to a four-year high, as noted in the AFS Logistics and TD Cowen Freight Index released July 14.
Andy Dyer, CEO of AFS Logistics, stated that diesel prices surged about 51% in the second quarter compared to the earlier months of the year. Jet fuel prices also rose by 90% year-over-year.
“Besides the immediate effects of rising freight rates, these changes have a knock-on effect on shipping costs overall,” he added. “Some light truckload carriers may temporarily halt operations instead of running with squeezed profit margins.”
Retailers Notice Consumer Caution
Tractor Supply, a retailer focused on rural lifestyles, has downgraded its full-year sales outlook, attributing this to higher fuel prices affecting customer spending during the spring season.
“Our customers often travel long distances in their pickup trucks, many of which run on diesel, making them particularly sensitive to rising fuel costs,” explained CEO Hal Lawton.
Lawton observed that while customers continue to invest in pets, livestock, and real estate, they’re becoming “more cautious” about their spending. Many are opting to combine trips, prioritize essential purchases, and be more thoughtful about discretionary spending.
Back-to-School Shoppers Could Face Higher Prices
The Footwear Distributors and Retailers of America association recently raised alarms regarding escalating tariff costs and increased shipping expenses, which pose significant challenges for the footwear industry as back-to-school shopping approaches.
Matt Priest, the CEO, noted that conflict in the Middle East has led to a 25% increase in the prices of petroleum-based materials crucial for footwear, which could translate to roughly a 5% rise in final product costs for consumers.
He mentioned that footwear companies are hurrying imports to beat the impending tariffs on foreign goods, which adds to the growing shipping costs.
“Container rates are skyrocketing right now,” he warned.
Rising Jet Fuel Costs Lead to Higher Airfares
Airlines, responding to rising fuel expenses due to the war, have begun increasing fares and implementing surcharges while scaling back on less profitable flights and routes. Though this strategy may protect airline profits, travelers are likely to encounter steeper prices and fewer options, especially in smaller markets.
American Airlines recently indicated that despite record revenues and robust travel demand, its net income for the second quarter saw a sharp decline, a sign of escalating costs affecting the travel sector.
American Airlines also stated that higher fares have offset nearly half of the increase in fuel costs, but this wasn’t enough to prevent it from revising its full-year outlook downwards.
Interestingly, in spite of rising prices, jet fuel demand has increased by 9% compared to the same period last year, according to the EIA.
