A hundred days into the US-Israel war on Iran, Americans are facing increasing financial pressure at the pump and at the grocery store in an economy already facing headwinds from United States President Donald Trump’s domestic and foreign policies, including tariffs.
The war is unpopular, with 66 percent of Americans disapproving of Trump’s handling of the conflict with Iran, according to a recent CBS News poll. That echoed comparable findings in an ABC News/Washington Post Ipsos poll that found that 61 percent of Americans said that military action in Iran was “a mistake”.
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US consumers are especially feeling the pinch in their wallets. On average, households have spent $750 more in expenses due to the war, according to an analysis from Moody’s Analytics. The bulk of the spending is on energy-related expenses, with Americans spending an average of $447.19 more than usual.
“This is a big economic blow,” Mark Zandi, chief economist at Moody’s Analytics, said in a post on X on the heels of the report, adding that the burden hits “already hard-pressed middle- and lower-income households”.
“Folks at middle income or lower income, they spend a bigger proportion of their income on goods and services each month than people at the higher levels of income who can save,” Michael Klein, professor of international economic affairs at The Fletcher School at Tufts University, told Al Jazeera.
“They spend more of their income on housing and food. And the prices of these have been going up by a lot.”
Petrol prices surged on Friday to $4.22 per gallon (3.78 litres) for regular fuel, compared with $2.98 per gallon on average on February 28, the day the US and Israel first struck Iran, according to the American Automobile Association (AAA), which tracks daily fuel prices.
Since then, Iran has retaliated by attacking energy infrastructure in the region and by throttling traffic through the Strait of Hormuz, from which a fifth of the world’s oil and gas is exported, sending prices for those commodities soaring.
Overall, inflation has surged, with energy prices being the driving factor. The cost of energy jumped 5.5 percent in the latest Personal Consumption Expenditures (PCE) report released by the Department of Commerce, which is one of the US Federal Reserve’s closely watched gauges for measuring inflation when deciding interest rates.
Inflation, overall, jumped to 3.8 percent from 3.5 percent the month prior, marking the biggest increase in three years, according to the PCE.
As a result of these economic strains, Americans are opting to work from home or cut back on plans that involve driving. A survey by American Muscle, a platform that sells car parts, found that 12 percent of Americans are choosing to work remotely more often amid heightened petrol prices, while a Washington Post/ABC News Ipsos poll found that 44 percent of Americans said they are driving less for that reason.
Consumer sentiment is tumbling, driven by high gas prices. The University of Michigan consumer sentiment tracker fell to 44.8 in the May survey, down from 49.8 in April and below last May’s 52.2, largely because of energy prices.
“Consumer sentiment fell for the third straight month as supply disruptions in the Strait of Hormuz continue to boost gasoline prices,” the University of Michigan said in a release accompanying the report.
That is echoed by a McKinsey survey, which found that sentiment is at its lowest level in two years. Consumer spending is tumbling as well, with two-thirds of US consumers pulling back on spending because of rising costs, according to The Conference Board’s consumer confidence report.
The increased cost of fuel has put a strain on the airline industry. Last month, Spirit Airlines ceased operations after more than three decades. In court filings, the budget carrier attributed its closure to an increase in fuel prices. Other US carriers have adapted their pricing to account for heightened fuel costs, including United Airlines, which, in late April, announced it would raise fares by up to 20 percent.
Overall airline prices have jumped since the war began. Airfare prices rose 2.7 percent in March and another 2.8 percent in April, according to the Labor Department’s Bureau of Labor Statistics.
Consumer expenses hit
While inflationary pressures have mostly hit the energy market, they have also started to affect downstream consumer expenses, including the cost of food. In April, food prices jumped 0.5 percent, marking the biggest increase since November 2022.
Pressure on the cost of food is expected to worsen. The Gulf region is a major supplier of both nitrogen and sulphur used in the fertilisers farmers need for food production. The World Bank projects that fertiliser prices will jump by 31 percent by the end of the year, with urea prices jumping 60 percent. The region produces 36 percent of the world’s urea exports.
As a result, food producers have had to raise prices in anticipation of higher operating costs in upcoming seasons.
“It’s been a double whammy for US farmers, who are both paying a lot more for diesel to run their tractors, drive their trucks, and transport their goods, but also paying a lot more to get those crops in the ground. A lot of that might not materialise in terms of higher prices until later in the fall, six to nine months later, once those crops are harvested and make it to market,” Jonathan Ernst, assistant professor of economics at Case Western Reserve University in Cleveland, Ohio, told Al Jazeera.
However, there has been a slight rise in the last month. Both meat and fruit and vegetable prices rose by 1.3 percent and 1.8 percent, respectively.
Tomato prices, in particular, jumped significantly, up 15 percent in March alone compared with the month before, according to the CPI, as tariffs and higher energy costs pushed up prices.
The war also affected mortgage rates. The average rate for a 30-year fixed mortgage jumped from 5.98 percent in February to 6.5 percent late last month.
The surge in mortgage rates came as the war pushed US Treasury yields higher because of heightened fuel and energy costs, leading to increased inflation. That, in turn, boosted interest in fixed-income assets such as Treasury bonds, resulting in demand for higher yields.
Because those yields are forward-looking, they influence interest-rate decisions made by the Federal Reserve. While the central bank does not directly set interest rates for consumer borrowing, commercial banks often peg their own rates to those established by the Federal Reserve.
“Mortgage rates are rates on longer-term loans, and when people make loans for an extended period of time, they’re thinking not just about sort of the interest rate today but what inflation will be because inflation erodes the value of payments made in the future,” Fletcher School’s Klein said.
“People anticipate higher inflation; lenders are going to require higher interest rates to compensate them for the erosion of the value of the dollar that they’ll be paid in the future.”
More funds for war
Due to the surge in inflation, it is unlikely that the central bank will cut interest rates in the near term. In fact, a recent analyst at JPMorgan Chase suggested that the Fed will not change rates until mid-2027, at which point the bank expects a rate increase rather than a decrease.
All of this puts pressure on the Federal Reserve. Trump has pressed the central bank to cut interest rates, which it has been reluctant to do under former Federal Reserve Chair Jerome Powell. In December 2025, Trump said he would only appoint someone to lead the central bank who agrees with him on rates.
Kevin Warsh, who was confirmed both to the Board of Governors of the Fed and as chair last month, will be tested at the central bank’s first policy meeting under his leadership, which is scheduled for June 16–17.
While consumers continue to feel the pinch, the Pentagon has asked for more money to fund the war. In March, the Pentagon requested that the White House seek $200bn in supplemental spending outside the existing budget to fund military operations in Iran. The White House ultimately requested $98bn in defence spending.
It is estimated that the Pentagon is spending $2bn per day on military actions in Iran, according to an analysis from the Harvard Kennedy School. And the US government is asking for more. The White House’s latest budget request calls for $1.5 trillion in spending in fiscal year 2027, up 42 percent from 2026. That comes with a 10 percent or $73bn cut in non-defence spending, including cuts to environmental programmes, the Department of Education, as well as cuts to agriculture spending and the Internal Revenue Service’s budget.
