100 Days of Iran Conflict: Americans Bear Rising Costs
Andy Hirschfeld
Since the U.S.-Israel military campaign against Iran began 100 days ago, the average American household has spent an extra $750, mostly on energy. Soaring gas prices, rising inflation at 3.8%, and higher food costs are squeezing consumers, while the Pentagon seeks billions more in funding.
Since February 28, when the U.S. and Israel launched their first strikes on Iran, Americans have faced mounting financial pressure, from gas to food prices. According to Moody's Analytics, the average U.S. household has spent an additional $750, with most of it—$447.19—coming from higher energy costs.
Mark Zandi, chief economist at Moody's Analytics, called it a "major economic shock," particularly hitting middle- and lower-income families hard. Michael Klein, professor of international economics at Tufts University, noted that low- and middle-income groups spend most of their income on housing and food, which are now surging in price.
Soaring gasoline prices are the main driver. According to the American Automobile Association (AAA), the average gas price hit $4.22 per gallon on June 6, up from $2.98 in late February. Iran retaliated by attacking regional energy infrastructure and restricting traffic through the Strait of Hormuz, which carries a fifth of the world's oil and gas, sending prices skyrocketing.
U.S. inflation rose to 3.8%, from 3.5% the previous month, marking the largest monthly increase in three years, according to the Commerce Department's Personal Consumption Expenditures (PCE) report. Energy costs rose 5.5% in the latest PCE reading.
Americans are adapting by cutting spending. A survey by American Muscle found that 12% of Americans are working from home more often due to high gas prices. Meanwhile, a Washington Post/ABC News Ipsos poll showed that 44% of Americans say they are driving less. The University of Michigan Consumer Sentiment Index fell to 44.8 in May from 49.8 in April, and below 52.2 a year earlier.
The airline industry is also feeling the pinch. Spirit Airlines ceased operations in May after more than three decades, citing rising fuel costs as a key factor. United Airlines announced fare increases of up to 20%. According to the Bureau of Labor Statistics, airfares rose 2.7% in March and 2.8% in April.
Food costs are starting to climb. In April, food prices rose 0.5%, the biggest increase since November 2022. Tomato prices jumped 15% in March alone, driven by tariffs and energy costs. The World Bank forecasts fertilizer prices will rise 31% by year-end, as the Persian Gulf region produces 36% of global urea exports.
Mortgage rates have also risen, from 5.98% in February to 6.5% by late May, as the war pushes U.S. Treasury yields higher. Kevin Warsh, confirmed as Federal Reserve chair last month, faces his first test at the June 16-17 policy meeting. JPMorgan Chase predicts the Fed will hold rates steady until mid-2027 and may raise rather than cut them.
While consumers bear the brunt, the Pentagon is asking for more funding. In March, the Defense Department proposed that the White House request $200 billion above the current budget to fund military operations in Iran, eventually settling on $98 billion. According to an analysis from Harvard Kennedy School, the Pentagon is spending about $2 billion per day on Iran operations. The White House's latest budget requests $1.5 trillion for fiscal year 2027, a 42% increase from 2026, paired with a 10% ($73 billion) cut in non-defense spending.
