The Iran war just crossed a psychological threshold for American consumers. Here’s what it means for spending, credit, and the broader economy.
For the first time since August 2022, Americans are paying more than $4 for a gallon of gasoline. The national average hit $4.018 on March 31, according to AAA — up from $2.98 the day before the US and Israel launched strikes against Iran in late February. That’s a 35% increase in roughly 30 days, the sharpest monthly surge in more than two decades.
The culprit is straightforward: the Strait of Hormuz, the narrow waterway through which roughly 20% of the world’s oil supply normally flows, has been effectively closed since the conflict began. Gulf Arab producers are cutting output because they have nowhere to store crude. Oil futures settled above $100 a barrel this week. The pressure isn’t easing.
Diesel is the bigger story
While gasoline grabs the headlines, diesel is where the real economic pain is building. The average diesel price hit $5.45 a gallon — up more than 40% since the war began. Diesel powers the trucks, trains, and freight vessels that move virtually everything Americans buy. Higher diesel costs flow through supply chains with a lag, showing up weeks later as higher prices on groceries, online orders, and manufactured goods.
Patrick De Haan of GasBuddy put it plainly: “Americans have already spent nearly $8 billion more on gasoline over the past month. Surging diesel prices may begin to reaccelerate inflation.”
What it means for consumers
The $4 threshold matters psychologically as much as economically. A CBS News poll found 90% of Americans expect the war to push fuel costs higher. Discretionary spending — dining out, travel, retail — tends to pull back when gas prices spike, as consumers redirect household budgets toward fuel and groceries.
For lenders, the signal is worth watching carefully. Near-prime and subprime borrowers are most exposed to fuel shocks — they spend a higher share of income on transportation and have less financial cushion to absorb the hit. If gas stays above $4 through Q2, expect to see early delinquency signals in auto and personal loan portfolios by late spring.
What happens next
The administration has released 172 million barrels from the Strategic Petroleum Reserve as part of a coordinated international effort, temporarily waived the Jones Act to allow foreign vessels to deliver fuel domestically, and lifted anti-smog regulations on seasonal gasoline blends. Analysts say these measures have slowed the surge — but not reversed it.
The EIA projects Brent crude will remain above $95 per barrel through May before easing. Macquarie analysts put a 40% probability on oil hitting $200 a barrel if the conflict extends into summer — a scenario that would push pump prices toward $7 a gallon nationally.
Vice President Vance called it “a rough road ahead.” That may be the most accurate economic forecast of the quarter.
For deeper analysis of how the macro environment is reshaping consumer lending — including the Fed’s rate path, recession probability, and what executives should be watching in Q2 — read The Lending Pulse, our weekly briefing for consumer lending leaders.
Start your free month at lendingpulse.news — no credit card required.
The Lending Pulse delivers weekly intelligence for consumer lending executives — macro signals, regulatory updates, earnings decoded, and company moves. Start your free month — no credit card required.
Start free month →