The news: Consumer spending at gas stations surged 18.1% YoY in March, as rapidly rising gas prices helped drive a 4.0% increase in overall retail and food services spending, per the US Census Bureau. The impact was even more pronounced month over month: a 15.5% jump at gas stations drove total spending to rise 1.7%.

On the surface, consumer spending appeared solid, with YoY gains in 10 of the 13 categories tracked. However, some of that strength may reflect larger-than-expected tax refunds, which were up 11.2% YoY, per IRS data. And spending in several discretionary categories remained modest, including restaurants and bars (up 2.4% YoY), health and personal care (1.6%), and food and beverage stores (flat).

Why it matters: While consumers are feeling the direct impact of the war in Iran through higher energy costs—from rising utility bills to prices at the pump—there are also downstream effects. For example, Karex—which produces roughly 20% of the world’s condoms for brands such as Durex—plans to raise prices by up to 30% as the war disrupts its supply chains and drives up costs, per Bloomberg.

As everyday expenses take up a larger share of budgets, consumers have no choice but to find places to cut back. We estimate that a sustained energy shock, with Brent crude above $100 a barrel, would slow core retail sales excluding gas and autos to 3%—below our 3.7% forecast—as purchasing power erodes. At the same time, we forecast that headline retail sales would rise to 4.8%, above our 3.4% base case, largely due to higher fuel spending.