A person refuels their semitruck at a Pilot Traveler Center in Lockhart, Texas, March 9, 2026.
Brandon Bell | Getty Images
The U.S. economy is more vulnerable than ever to the problems in energy markets caused by the Iran war. The economy has been remarkably resilient, but the buffers that protected Americans from earlier price spikes are wearing thin.
Bottom line: The war will erode Americans’ standard of living this summer even if the actual fighting stays more contained than during the first phase of the conflict.
From President Donald Trump’s perspective, having kicked off a return to direct conflict with Iran, there is now little he can do to shield Americans from the economic fallout.
The White House says the president has been honest with the American people and that prices will fall soon. “As the U.S. military degrades the terrorist Iranian regime’s ability to attack commercial vessels and disrupt the free flow of energy through the Strait of Hormuz, oil and gas prices will plummet back to pre-conflict levels,” Taylor Rogers, a White House spokeswoman, said in an email.
Anyone who has filled up at the pump in recent days has already felt the pain. The national average price at the pump was $4.06 a gallon on Wednesday, up 4.4% from $3.89 a week ago, according to AAA.
That’s painful. But for the full economic effect, watch diesel, “because of course that is the lifeblood of the U.S. economy,” said Christian Lawrence, head of Americas and energy market strategy at Rabobank.
The U.S. Energy Information Administration’s benchmark for diesel jumped nearly 34 cents last week to $5.13 a gallon, the biggest weekly climb since the first week of the war in March. Those figures are used to determine fuel surcharges that airlines and other companies impose on customers, which can push price hikes out to the rest of the economy.
We’ve been here before, of course. The start of the war in March saw oil prices spike and gas and diesel prices follow, only to fall when the shooting paused a few weeks later. With periodic reports that the U.S. and Iran are trying to hash out a new pause in the fighting, it might seem like a return to lower prices is only a presidential Truth Social post away.
Unfortunately, that’s where things have changed, particularly in economically vital diesel.
“There’s a bit of an asymmetric relationship there in the sense that, if oil goes up, then diesel prices are going up,” Lawrence said. “If oil goes down, diesel prices might come off a little bit, but they’re still going to be much higher.”
Problems have been accumulating in the refining sector that turns raw crude oil into the distilled products that actually get pumped into cars and trucks. U.S. refineries are at 96.1% of their capacity, the EIA said Wednesday.
If refineries could produce more at that level, they would. U.S. refineries kicked into overdrive when the war started to help produce jet fuel and other products for European markets that suddenly found themselves cut off from their suppliers in the Middle East.
Inventories that were run down early in the war have yet to be replenished amid summer demand. The EIA reported last week that storage at the crucial delivery point of Cushing, Oklahoma, has since early June been at so-called tank bottom, the level at which remaining liquids can’t physically be drawn out.
The Strategic Petroleum Reserve is down to 311 million barrels, its lowest level since March 1983, according to EIA data.
Iran isn’t the only war still raging, either. Ukraine hit 24 out of Russia’s 34 largest refineries in the past three months, analysts with BofA Global Research note. Russia has switched from a supplier of diesel and other products to an importer, just as China is trying to restock its own inventories.
More oil is getting through the Strait of Hormuz now than during the teeth of the crisis in March, according to the International Energy Agency, even as ship attacks in the waterway continue to be a risk. But that oil doesn’t help anyone until it’s turned into something useful for the global economy. That makes benchmark prices like Brent crude, at $94 a barrel midday Wednesday, less important as an indicator than the retail prices consumers actually pay.
None of this amounts to an immediate economic crisis, but it adds to the affordability pressures that have been weighing on Americans for years. Inflation data delivered a happy surprise last week when the consumer price index came in at a better-than-expected 3.5% for June. But the reprieve is likely temporary. Higher fuel prices will eat into wage gains and force Americans to dip deeper into their savings.
The CNBC All-America Economic Survey released last week found 37% of U.S. voters said they are using credit cards more often to pay for things due to higher food and gas prices. That’s a 6% increase since April as the war has dragged on.
The administration has tried to stanch the bleeding. It directed a massive release of oil from the SPR, eased restrictions on which ships can carry fuel and other commodities, and reduced sanctions on Russian and Iranian oil. All of these measures are arguably already priced into the market, however, and it isn’t clear there are more levers the administration can pull in the short term.
A lasting end to the conflict would lower oil prices, but gas and diesel may be stuck high at least through Labor Day, when the end of summer has fewer people on the roads. The surge in demand will eventually prompt more refinery construction.
“But this takes time. There is no short-term solution,” Lawrence said.