Gas Prices Rise 50% Since Start of Iran War

Lower-income Americans reduced their gasoline consumption by 7% in March but still spent 12% more at the pump after the Iran war began on Feb. 28 and drove prices higher, according to a report from the Federal Reserve Bank of New York released Wednesday.

Higher-income households increased their gas spending by 19% while cutting consumption by only 1%. Overall U.S. gasoline consumption fell 3% that month even as total spending at gas stations jumped 15%. The New York Fed found the gaps in how different income groups responded were larger than during the 2022 price shock after the Russian invasion of Ukraine.

Poorer households, defined as those earning less than $40,000 a year, appear to have cut back on driving by carpooling, using public transit or combining trips. Wealthier households earning $125,000 or more made few changes.

The report described a K-shaped pattern in gasoline consumption, with faster growth for high-income households relative to low-income ones. This divergence has worsened what economists call the K-shaped economy, in which upper-income Americans continue to fare better while lower-income households fall behind.

A separate analysis from the Bank of America Institute found that among the poorest one-third of households, one-tenth now spend 10% of their incomes on gas, compared with 2.7% for higher-income households. Growth in poorer households’ discretionary spending slowed in March while it rose for middle- and upper-income groups.

The New York Fed researchers wrote that households had very different experiences with gasoline spending. If the extra spending on gas persists it will pull money from other areas, reducing inflation-adjusted consumption and slowing the broader economy.

Consumer spending adjusted for prices rose only 0.2% in March, down from 0.3% in February.

U.S. airlines spent $5.06 billion on jet fuel in March, 56.4% more than the $3.23 billion spent in February, according to Department of Transportation data released Wednesday. The increase came after U.S.-Israel strikes on Iran effectively closed the Strait of Hormuz.

Carriers have lowered or scrapped their 2026 forecasts because of the fuel surge, their second-largest expense after labor. Some scaled back growth plans to avoid excess capacity. Spirit Airlines collapsed over the weekend, citing the jet fuel cost increase as a factor that foiled its emergence from bankruptcy.

That equals about 13,000 fewer flights, or less than 2% of global capacity. Istanbul and Munich routes saw the largest drops, with Turkish Airlines and Lufthansa making major reductions. Lufthansa cut 20,000 short-haul flights operated by its CityLine subsidiary.

Some cuts involved switching to smaller planes rather than full cancellations. The price of jet fuel has more than doubled since the closure of the Strait of Hormuz. Most UK short-haul airlines are hedged for the immediate future, and the industry reports no current shortages given normal six-week supply visibility.

International agencies have warned of potential European shortages if the Middle East conflict continues.

“We find that households had very different experiences with gasoline spending. With the sharp increases in gasoline prices in March, a K-shaped pattern in gasoline consumption emerged—showing faster consumption growth for high income households relative to low-income households.”

U.S. oil exports of crude, gasoline, LNG, diesel, jet fuel and ethane rose 20% year-over-year in the first four months of 2026, reaching 153 million tons, according to Kpler data reported by Reuters. The United States has served as a swing supplier amid the global energy shortage triggered by the war.

G7 trade ministers met to seek common ground on securing supply chains for critical minerals amid the geopolitical tensions. France’s finance minister stated that airlines have sufficient jet fuel for May and June.

Airlines have begun raising checked baggage fees to offset higher fuel costs. Booking trends still show consumers traveling, with travel agency ticket sales up 12% in March from a year earlier. Domestic trips rose 5% and international trips 1%. The UK government relaxed “use-it-or-lose-it” slot rules so airlines can cancel lightly booked flights without losing future rights.

Ministers asked UK refineries to maximize jet fuel production but resisted industry calls to cut taxes or ease environmental rules. The transport secretary said there were no immediate supply issues but that officials were preparing to avoid summer disruption.