Rising gas prices could be the straw that breaks consumer spending

Global Retail // March 23, 2026 Rising gas prices could be the straw that breaks consumer spending By Gabriela Barkho Ivy Liu The escalating conflict among the U. S. , Israel and Iran shows no signs of stopping soon, and that is being felt across the global energy markets. In recent days, prices at pumps across the U. S.

jumped by about 30% and are headed toward $4 per gallon. The rising fuel costs have experts predicting a rapid ripple effect on the U. S. retail industry, as concerns over transportation signal pressure on already-squeezed shoppers.

With retailers still grappling with the effects of tariff-related inflation, shoppers could start to pull back on discretionary purchases as they prioritize fuel and necessities. For economic experts, the longer the war goes on, the more likely these outcomes are.

This is especially concerning, as people head into the summer travel season, when gas prices have historically been higher. Last week, the director of the National Economic Council, Kevin Hassett, received pushback after being asked about the war’s toll on American consumers and calling it “the last of our concerns.”

But Americans are already starting to look for savings wherever they can, whether it’s bulk shopping or using gas rewards programs. Andy Tsay, a professor at the Leavey School of Business at Santa Clara University, said “rising fuel costs hit drivers’ wallets hard and drain money away from retail aisles.”

As expected, Tsay said, gas is the straw that often breaks consumer sentiment. “No matter what the official statistics may say, or may be massaged to say, everything just feels more expensive,” he said.

“Once gas crosses a certain threshold at the pump, you see a broad pullback as people delay big‑ticket purchases and cut back on ‘nice-to-have’ items, even if they still make the essential trips,” he said.

Tsay went on to say that “any discussion of economic impact has to acknowledge the context of a bifurcated economy, which you may call K‑shaped or barbell‑shaped.” At the top of the barbell, higher‑income households are still spending freely on travel, luxury and experiences, while the broad middle is trading down or pausing purchases altogether.

“The tariff rollercoaster, immigration policies, energy shocks and now the prospect of extended instability in the Middle East all tend to land hardest on that middle and widen the barbell shape,” Tsay said. Retail analysts expect the gas crisis to be the latest blow to an already-struggling retail economy.

John Mercer, head of global research at Coresight Research, said that at this time last year, in March 2025, American consumers spent about $31 billion per month on gasoline. “If gas prices rise a theoretical 20% and consumers have limited scope or willingness to cut their consumption, that would cost consumers an extra $6.

3 billion per month compared to a year ago,” Mercer said. Combined with the reduced propensity to drive to stores, Mercer said, this would negatively impact some consumer spending, primarily in discretionary categories. These include retail categories like clothing, footwear, beauty, electronics and home goods.

Mercer said rising gasoline prices will indeed pressure consumers’ discretionary spending, starting with lower-income consumers, who are most sensitive to price rises in essentials. Meanwhile, there is also hesitation in spending among higher-income consumers, as stock market declines will dent sentiment and willingness to spend.

“Higher-income shoppers drove retail sales growth in 2025, and we anticipate them doing so this year too,” Mercer said. Coresight’s weekly consumer sentiment index has already picked up declines in financial confidence among lower-income consumers, Mercer said.

2026 was already expected to be a year of still-elevated inflation, and it is likely to mark the sixth consecutive year of the U. S. CPI (Consumer Price Index) averaging above 2% on an annual basis. For retailers, Tsay said, price transparency can be key in maintaining sales during this period.

Explaining that some price changes are driven by fuel, tariffs or supplier costs “can build trust rather than resentment,” he said. “In terms of signals of shifting behavior, we will be looking at [weekly] shopper traffic to stores and our proprietary consumer survey data,” Mercer said. But there is one potential relief on the horizon.

“One mitigating force is the strength of the tax refund season, which will provide some buffer for many consumers to absorb added costs,” said Mercer.