Disruptions to Middle East oil and gas supplies since the start of the Iran war have pushed U.S. fuel prices higher and could reduce U.S. GDP growth by as much as 0.3 percentage points in 2026, according to economists. The average cost for a gallon of gasoline in the United States stood at $4.06 as of Friday, according to AAA, more than $1 higher than before the war began.

Brent crude was trading at $105 a barrel as of midday Friday, up 44% from prewar levels. One-fifth of the world's oil supply normally flows through the Strait of Hormuz, where traffic has been disrupted by the conflict. Economists forecast that oil prices will dip later this year but remain above prewar levels throughout 2026.

"I think the damage has already been done, in part because there's no going back on oil prices, at least not any time in the near future," said Mark Zandi, chief economist at Moody's Analytics. He said oil production will take a long time to ramp up to prewar levels of 100 million barrels a day because of widespread damage to energy facilities across the Middle East.

The Consumer Price Index reached 3.3% on an annual basis last month, its highest level since May 2024. The Personal Consumption Expenditures price index rose 2.8% on an annual basis in February. Scott Lincicome, vice president of general economics at the Cato Institute, said the PCE index could hit 4% by the end of the year, double the Federal Reserve's 2% target rate.

"Consumers, of course, want deflation, and we're definitely not getting that. We should expect things to remain higher than what people want," Lincicome said.

Diesel prices have risen, increasing the cost of transporting goods. "Anything that's put on a truck is going to cost more," Zandi said. Jet fuel prices have increased by more than $2 per gallon as of earlier this month, and airlines have raised ticket prices and introduced bag fees to offset the higher costs. In a report released Friday, the International Energy Agency predicted that the conflict in the Middle East will keep global natural gas supplies tight for two years.

"Wholesalers and distributors and retailers can each absorb some of the hit. So it might not be a full pass through to consumers, but it's going to be some," he said.

Consumer spending accounts for about 70 cents of every dollar of GDP. GDP grew by 2.1% in 2025. Economists project that the war could reduce GDP growth by 0.3 percentage points this year, with GDP expected to grow by 1.8%.

"Our view is that full normalization will still take time, especially when it comes to supply chains, when it comes to energy capacity," said Lydia Boussour, senior economist at EY-Parthenon. "Cutbacks from consumers are really the key channel through which we're expecting the drag on economic activity to materialize," she said, adding that a softer labor market and weak wage growth could erode purchasing power.