A sign displays prices for gasoline at a station on March 2, 2026 in Chicago, Illinois.
Scott Olson | Getty Images
While the U.S. war with Iran is playing out thousands of miles away, American consumers are already feeling financial ripple effects.
The U.S.-Israeli strikes on Iran over the weekend gave way to a week with topsy-turvy markets, spiking mortgage rates and higher prices at the pump. These changes can drag on already-lackluster consumer sentiment while further elevating affordability as a leading political issue.
“Wars are never good for consumer sentiment,” said Mark Brennan, an associate professor at New York University’s Stern School of Business. “They might be good for munitions, manufacturers and lobbyists and all these clowns, but not good for the average consumer.”
An average gallon of gas in the U.S. hit $3.25 on Thursday, according to AAA. The one-week jump of 27 cents is similar to what was seen during the onset of the Russian invasion of Ukraine in 2022, the organization said.
Gas’ 8.5% increase over three days is the largest since Hurricane Katrina devastated New Orleans in 2008, according to an analysis from Bespoke Investment Group.
With Friday’s jump in oil prices, gas prices are set to climb even further. Gasoline futures trading in New York were up another 2% on Friday.
RBOB Gas futures, 1 year
To be sure, consumers had been feeling some relief on oil prices before this week’s shock. The average price of a gallon fell to its lowest level since 2021 late last year, according to AAA.
Mortgage rates climbing
The 30-year mortgage rate jumped above 6.1% this week, according to Mortgage News Daily. The popular fixed-rate loan had previously traded below 6%, which was around multiyear lows.
Mortgage rates broadly track the 10-year Treasury yield, which climbed back above 4% this week in the wake of the attack on Iran. Higher oil prices are raising concerns in the bond market about inflation revving back up, driving yields higher.
30-Year Fixed Mortgage Rate, YTD
Stocks whipsawed this week, which can add to uncertainty felt by consumers who either actively trade stocks or have exposure to the market by way of retirement plans.
The Dow Jones Industrial Average fell nearly 800 points on Thursday as U.S. crude oil broke above $80 per barrel, reigniting concerns about how the war could hamper markets. The blue-chip average has lost more than 2% this week, while the broad S&P 500 shed 0.7%.
If U.S. crude prices climb above $100 per barrel, a global recession could ensue, according to Dan Niles. But such a scenario isn’t likely to play out, the founder of Niles Investment Management said in an interview on CNBC’s “Power Lunch,” as he anticipates the conflict will only last about a month.
These ripple effects can intensify the woes Americans have been feeling since runaway inflation seen during the pandemic weakened their financial footing. Consumer sentiment has tumbled near record lows in recent months, according to the University of Michigan’s closely followed Surveys of Consumers.
Even before the war rattled markets, growing economic inequality and the high cost of living had already made affordability a political buzzword this year as Americans head to the polls for midterm elections.
“Wars put everybody ill at ease,” Brennan said. “It’s hard to paint a rosy scenario coming out of any of this stuff.”
— CNBC’s Sean Conlon, Pia Singh and Diana Olick contributed reporting.
