The situation: The escalating US-Iran conflict threatens to unleash fresh headwinds for the retail industry, which is already under pressure from the Trump administration’s shifting trade policies.

The fallout: Iran’s parliament endorsed closing the Strait of Hormuz, which the US Energy Information Administration calls one of the “world’s most important oil transit chokepoints” because roughly 20% of the world’s oil supply passes through the narrow waterway. If Iran follows through on that threat—or if tensions rise further, especially following its missile strike on Al Udeid Air Base, the largest US military installation in the Middle East—it could unleash significant economic ripple effects at an already precarious moment for US retailers.

• Gas prices would soar. Any disruption to shipping in the Persian Gulf could cause oil prices to spike past $100 per barrel—a 30% jump from current levels, per The Washington Post. That would likely push the average US gas price—now $3.22 per gallon, per AAA—north of $4, delivering a substantial blow to consumer wallets. The impact would be especially hard on lower- and middle-income households.
• Inflation could accelerate. Higher fuel prices ripple throughout the economy by increasing retailers’ transportation and logistics costs. That could push up prices, forcing retailers to either pass costs to consumers or absorb them at the expense of margins.
• Consumer sentiment may take a further hit. Sentiment was already under pressure well before the conflict due to the Trump administration’s shifting trade policies and fears of rising costs. A spike in gas prices would throw fuel on that proverbial pessimistic fire, as fuel costs are both a constant, unavoidable burden and a highly visible symbol of economic stress—even for those who don’t drive. That combination could easily trigger a sharp pullback in discretionary and big-ticket spending as consumers grow more cautious.
• Retailers may face significant margin pressure. Retailers are already feeling pressure to absorb significant tariff-related costs without driving away price-sensitive shoppers. But that’s a significant strain for many; 34% of retail executives say they can’t absorb any more tariff costs without raising prices, per a recent 7thonline survey of retail executives. If fuel-driven inflation is added to the mix, many retailers may face difficult choices: raise prices and risk weakening demand, or absorb costs and see margins shrink.

Our take: Uncertainty has loomed over the industry all year, making it increasingly difficult for retailers to plan ahead with the Trump administration’s shifting trade policies. Case in point: The 90-day reciprocal tariff pause is set to expire on July 9, and there’s little clarity as to whether it will be extended or if the sweeping levies will take effect.

The escalating US–Iran conflict only adds to the volatility, compounding the pressure on retailers. Together, these factors make it increasingly likely that the operating environment will remain murky for the remainder of the year.