American households are facing a renewed squeeze from rising gasoline prices this summer, but this time without the cushion of tax refund season that helped offset similar pain earlier in the year, leaving consumers more exposed just as the conflict tied to Iran flares up again.
A Second Wave of Pain, Without the Safety Net
Earlier in 2026, higher gas prices tied to the outbreak of the Iran war largely canceled out the boost many households received from unusually large tax refunds, themselves driven by new provisions in President Trump’s tax legislation. Economists at Moody’s Analytics calculated that the average household spent roughly $447 more on fuel and energy since the conflict began in late February, an amount that more than offset the roughly $384 average boost from bigger refunds. That dynamic effectively left many families financially treading water through the spring, even as the headline refund numbers looked historically strong.
Now, with tax refund season long over and fuel prices climbing again amid renewed fighting, that offsetting cushion is no longer available. Gasoline prices crossed $4 a gallon in mid-July for the first time in over a month, driven by fresh disruptions to oil flows through the Strait of Hormuz as hostilities between the U.S. and Iran reignited. Without a comparable financial buffer to soften the blow this time, the renewed price pressure is landing more directly on household budgets.
The Toll Keeps Adding Up
The cumulative cost of the conflict has continued to climb the longer it drags on. By late spring, cumulative fuel-related costs to American consumers had reached roughly $60 billion since the war began, according to Moody’s data, with Chief Economist Mark Zandi warning that if elevated prices persisted, the average household could face a hit of nearly $2,000 by the one-year mark of the conflict. Separate estimates from Oxford Economics projected that if gas prices averaged around $3.60 to $3.70 a gallon for the year, the added cost to consumers could reach $60 billion to $70 billion, an amount roughly equivalent to or exceeding the total boost from this year’s larger tax refunds.
Lower-income households have borne a disproportionate share of that burden throughout the year, since gasoline and energy costs consume a considerably larger share of their budgets compared with wealthier consumers. Goldman Sachs has said it expects elevated energy prices to continue eroding consumer spending power for the remainder of 2026, with the effect falling hardest on households that spend a larger portion of their income on necessities like food and fuel.
A Weaker Financial Position Than in Past Shocks
Economists have also pointed out that American households are entering this latest price shock from a notably weaker starting position than during previous energy crises. Unlike 2022, when gas prices spiked amid Russia’s invasion of Ukraine but many households still had elevated savings left over from pandemic-era stimulus payments, consumers now face this renewed pressure with hiring activity nearly stagnant and personal savings rates having steadily declined in recent years. That combination leaves less of a buffer to absorb higher costs without cutting back on other spending or leaning further on debt.
Businesses Feel the Squeeze Too
The pain has not been limited to individual drivers filling up their tanks. Businesses reliant on trucking, diesel, and jet fuel have faced mounting cost pressure as well, with some companies choosing to absorb the higher expenses rather than risk alienating price-sensitive customers, while larger firms including airlines have moved to raise fees in response. Analysts note that discretionary consumer spending typically softens first during episodes like this, as households prioritize essential costs like fuel and groceries over optional purchases.
What Comes Next
With gas prices remaining elevated as the conflict continues and no comparable financial offset like tax refund season on the horizon, economists warn that consumer spending growth could slow further in the months ahead. Whether prices ease as diplomatic efforts continue or climb further amid ongoing hostilities will likely determine how much additional strain American households face heading into the second half of the year, at a moment when many already have less financial cushion to fall back on than in past energy shocks.
