The situation: The escalating conflict in Iran threatens to push gas prices higher, injecting fresh volatility into a retail industry already grappling with policy whiplash.

The sector is still digesting the Supreme Court’s ruling that the Trump administration lacks emergency authority to impose many of its tariffs, followed by the president’s swift implementation of a 10% global tariff under Section 122 of the Trade Act of 1974.

Higher fuel costs pose another headwind. Retailers had been expecting a short-term spending surge as the average individual tax refund is up 10.2% YoY so far this year, per the IRS. But now, that extra cash may go to higher fuel bills or savings instead of discretionary purchases.

The fallout from rising gas prices: The conflict compounds an already challenging macro backdrop.

While many consumers have struggled with higher living costs pressuring their household budgets, one of the few recent bright spots has been at the pump. The average price of gasoline in early January was $2.73 per gallon, down 28.9 cents YoY, per GasBuddy. Even after recent increases, last week’s average of $2.94 remained 10.1 cents below year-ago levels.

That relief may fade. Traffic through the Strait of Hormuz—a chokepoint that carries about 20% of global oil supply—has slowed sharply, and a nearby drone strike paused a major Saudi refinery, pushing crude higher. A $10 increase in crude typically adds roughly 24 cents per gallon at the pump, RSM chief economist Joe Brusuelas told Axios.

Gas prices carry outsize psychological weight. Prominently displayed and paid frequently, increased pump prices keep inflation concerns front and center, squeezing household budgets and dampening consumer sentiment. Over the past half-century, rising gas prices have typically lifted inflation expectations. (That link weakened last year as tariffs kept inflation expectations elevated despite falling gas prices.)

Rising fuel costs also pressure logistics. Diesel prices could climb as much as 20 cents per gallon this week, raising delivery expenses and compressing retailer margins.

The broader implications: The fallout extends well beyond US consumers.

Iran’s retaliatory strikes have closed airports, disrupted ports, and rattled financial markets in the Gulf region’s most widespread business interruption since the pandemic, per Reuters. The timing coincides with Ramadan, one of the Gulf’s peak shopping and networking seasons, and threatens tourism and retail just as demand typically surges.

The conflict is also disrupting global cargo networks. Major ocean carriers have suspended or rerouted services tied to the Middle East, with some vessels diverting around the Cape of Good Hope, extending transit times and absorbing global container capacity.

Air cargo faces similar strain. FedEx has suspended flights to multiple Gulf markets, while other carriers have restricted operations due to airspace closures. Freight forwarders are warning of longer lead times, tight capacity, elevated rates, and continued volatility.

Cross-border ecommerce platforms are seeing delays. Shipping times to the Middle East have lengthened, with Temu, Shein, and Amazon showing extended delivery windows, according to Bloomberg. Continued suspensions and surcharges could raise freight costs and complicate inventory planning just as peak seasonal demand unfolds.

More broadly, the situation underscores how quickly geopolitical shocks can ripple through retail. Higher crude prices lift fuel costs, squeeze consumers, and raise delivery expenses, while transport disruptions slow fulfillment and strain international supply chains. For retailers already navigating tariff uncertainty and cautious shoppers, the conflict adds another layer of unpredictability to demand and margins in the months ahead.