WASHINGTON— Surging gasoline prices and the war in the Middle East are reshaping how Americans and credit union members spend, save and make everyday financial decisions, with economists and analysts warning the ripple effects are spreading well beyond the fuel pump, affecting everything from CU ag loans to the cost of balloons for that employee birthday party.
U.S. gas prices have climbed above $4 per gallon in recent weeks, driven largely by geopolitical tensions and disruptions to global oil supply. The impact is immediate and visible: Americans are now spending hundreds of millions of dollars more on gasoline each month, diverting money from other household needs, according to Yahoo Finance.
“…The immediate hit to their pocketbooks is by far the biggest impact. But we also know consumers are pretty sensitive to interest rates after the 2022/23 shock, and the savvier ones will connect the dots between expected inflation and interest rates,” Curt Long, VP-data & research and chief economist with America’s Credit Unions, told the CU Daily. “We’ve seen comments from FOMC members (even the more dovish ones) who say this changes things and pushes potential rate cuts further into the future. So that may dampen demand for autos and housing.
“In general, we would also expect lenders to be more cautious if there’s an unanticipated shock that could affect loan repayment,” Long added. “And I think this certainly qualifies.”
Straining Budgets
Long isn’t alone in his view.
“Higher gas prices would likely affect consumer spending, particularly lower-income shoppers,” Mark Mathews, chief economist at the National Retail Federation, told PBS NewsHour, noting even small weekly increases can strain budgets.
As fuel costs rise, consumers are cutting back on nonessential purchases, according to a number of analyses.
- Wells Fargo analysts found that when gas prices approach $4 per gallon, discretionary spending begins to decline meaningfully.
- Retail experts say shoppers increasingly prioritize essentials like fuel and groceries over items such as apparel and entertainment.
- Oxford Economics forecasts slower consumer spending growth in 2026 as energy costs climb.
That pullback reflects a broader economic reality: fuel is a non-negotiable expense for most households, meaning higher prices act like a tax on consumption, analysts reminded.
What Households are Reporting
A Reuters/Ipsos poll found 55% of Americans say rising gas prices are hurting their finances, with one in five describing the impact as significant.
Higher fuel costs are also offsetting gains elsewhere:
- Analysts say increased gasoline expenses could effectively wipe out larger tax refunds for many households.
- Lower-income consumers are disproportionately affected, as fuel takes up a larger share of their budgets.
In some regions, drivers are paying dozens of dollars more per month for fuel compared with earlier this year, adding to financial strain.
Broader Inflation and Behavioral Shifts
Rising gas prices are also feeding into inflation expectations and changing consumer sentiment.
The Federal Reserve Bank of New York reported a sharp increase in expectations for gasoline prices, with consumers anticipating nearly 10% growth over the next year, according to Reuters.
Analysts say that perception can influence behavior just as much as actual prices.
- Higher energy costs are pushing up transportation and shipping expenses, raising prices for goods across the economy.
- Economists warn prolonged oil price increases could lift overall inflation and weigh on economic growth.
At the same time, some Federal Reserve officials note that consumers have so far treated the spike as temporary, limiting drastic changes in overall spending patterns — at least for now.
A visible economic pressure point
Gasoline prices carry outsized psychological weight because they are highly visible and frequently encountered, economists say. As a result, they often shape perceptions of the broader economy more than other costs, according to analysts.
“Gas prices are not just a number on a sign,” The Washington Post reported, noting their influence on consumer sentiment and even political attitudes.
Other Fallout from the War in the Middle East
Higher gas prices and fuel shortages are also playing out in ways beyond the gas pump, including:
- Beer and soda cans could cost more. Aluminum prices recently hit a four-year high, after Iran struck two large smelters of the metal in the Middle East. Both of them were major suppliers to the United States.
- Birthday balloons and smartphones need helium The U.S. is the world’s biggest helium exporter, but Qatar makes about a third of the global supply — and it’s stopped producing and shipping the gas because of the blockade in the Strait of Hormuz. Helium is used in MRI scanners and for propelling rockets. It is also used in manufacturing the semiconductor chips that are needed for computers and phones.
- Fewer crops are being planted, which might lead to food scarcity. About a third of all fertilizer shipped globally goes through the Strait of Hormuz. Saudi Arabia, the United Arab Emirates, Kuwait and Iran are big global producers. The war has triggered a 25% price hike in fertilizer and comes at a time when U.S. farmers are planting corn. Of note to credit unions that are ag lenders, the Fertilizer Institute, an agricultural association, predicts that American farmers are going to be short of some two million tons of fertilizer this spring, so they will plant fewer crops — and this will likely happen all around the world. That will affect global food production. A key component of batteries is costing more.
- Sulfur is a key component for many industrial processes, including in the manufacturing of semiconductors, batteries and other high-tech materials. Significant amounts of sulfur pass through the Strait of Hormuz.
