Iran war costs US households $860 more in higher energy prices, economist says

• Total additional energy costs reached approximately $115 billion across U.S. households, averaging $860 per household due to elevated prices for gasoline (over $4/gallon), diesel, and jet fuel
• Lower- and middle-income Americans are struggling the most as their after-inflation incomes have stalled or declined, while wealthier households with stock portfolios and low-rate mortgages can better absorb the costs
• Oil prices are unlikely to return to pre-war levels in the foreseeable future due to ongoing supply constraints at the Strait of Hormuz, insurance premiums, and the time needed to replenish strategic petroleum reserves

Summary

Key Economic Impact:

Mark Zandi, chief economist at Moody's Analytics, reports that the Iran war has cost American consumers approximately $115 billion in higher energy costs this year, averaging $860 per household. These increases stem from elevated prices for gasoline, diesel fuel, and jet fuel.

Market Dynamics:

The conflict has disrupted oil flows through the Strait of Hormuz, a critical chokepoint handling about 20% of global oil supply. Despite U.S. Navy escorts and alternative transportation methods like pipelines, oil supplies remain "well, well below" pre-war levels. Gas prices have exceeded $4 per gallon, creating significant economic pressure.

Demographic Impact:

Lower- and middle-income households face the greatest burden, with after-inflation incomes stagnating or declining. Higher-income households are better positioned to absorb costs due to employment stability, low-rate mortgages, and stock market gains.

Mitigation Efforts:

Early 2026 tax refunds from the "One Big Beautiful Bill Act" temporarily cushioned the impact through May-June, but this relief has now expired. The U.S. and other nations, including China and India, have released strategic petroleum reserves to stabilize markets.

Outlook:

Zandi expects oil prices will decline once supply normalization signals emerge, but warns against expecting pre-war price levels soon. Contributing factors include:

• Ongoing geopolitical risk premiums for insurance companies
• Time required to restore depleted inventories
• Lengthy process for global production increases to compensate

Recovery timelines extend beyond the next quarter, potentially into following years, as infrastructure and supply chains require substantial time to normalize.