The news: The rising cost of gas, utilities, and other household expenses tied to the war in the Middle East is adding to the strain on low-income consumers. These households were already struggling with persistent inflation, along with recent cuts to SNAP and Medicaid benefits.

Lower-income households—those earning less than $40,000—responded to the March spike in gas prices by using public transportation or carpooling more. Even so, their gas spending rose 12% despite buying 7% less gas, per the Federal Reserve Bank of New York.

In light of financial challenges, lower-income consumers have less to spend elsewhere. Goldman Sachs estimates their pre-savings discretionary cash inflow will grow just 0.8% this year, a significant dip from the 3.2% it forecast prior to the war’s start in January. That pressure is also reflected in record-low sentiment about the economy among low-income consumers in May, per University of Michigan data.

Why it matters: Brands, retailers, and restaurants are already seeing the impact.

• Lower-income consumers are staying home more often or seeking lower-cost options, said John Peyton, CEO of Dine Brands, parent of Applebee’s and IHOP.
• McDonald’s CEO Christopher Kempczinski echoed that point, noting that low-income spending continues to fall as elevated gas prices disproportionately affect those consumers.
• “Consumers are literally running out of money toward the end of the month,” Kraft Heinz CEO Steve Cahillane told The Wall Street Journal, adding that “being there with the right offering at the right time has never been more important.”
• Whirlpool is seeing similar behavior shifts—it reported a boom in its spare parts and repair business as consumers opt to repair appliances rather than replace them.

Implications for brands and marketers: The pressure on low-income consumers is unlikely to stay contained. The longer the war in Iran drags on, the more likely it is that the strain will move up the income ladder, forcing higher income-level households to make tough spending decisions.