Gas is just the start: What else the Iran war could soon cost you
Gas is just the start: What else the Iran war could soon cost you
Since the conflict between the US and Israel began with Iran, the sharp rise in oil and gas prices has captured significant attention from both markets and consumers. However, this is merely the beginning of a broader economic impact that extends to other everyday items. As oil prices surge, the expenses related to moving goods globally have already climbed, and they are expected to keep rising as the conflict drags on.
Businesses, which have already absorbed most of the costs from tariffs introduced by the administration in the previous year, now face limited flexibility to manage these additional expenses. According to Brian Bethune, an economics professor at Boston College, prolonged higher oil prices could result in lasting cost shocks. “If we see the persistence of these higher (oil) prices for a period of time, then you’re going to see a persistent cost shock,” he explained.
Transportation costs and fuel surcharges
Shipping rates are heavily influenced by diesel prices. For example, FedEx Ground and home delivery services activate a 21.5% fuel surcharge once diesel hits $3.55 per gallon. As of March 9, diesel prices reached $4.86 per gallon, an increase of almost $1 compared to the prior week. This means a 24.75% fuel surcharge will apply for the upcoming week, based on data from the US Energy Information Administration.
Similar mechanisms exist across all major freight methods—air, rail, and ocean—depending on the type of fuel used and its price. This interconnected system highlights how fuel costs ripple through various sectors of the economy.
Impact on grocery stores
Deborah Weinswig, CEO and founder of Coresight Research, a supply chain and retail research firm, noted that grocery stores are likely the first places where consumers will feel the effects of higher fuel prices. “Specifically, the produce, meat, and dairy aisles will see these impacts,” she said. Items that don’t last long on the shelf are harder to stockpile, making them more susceptible to price hikes.
Outside of grocery stores, the effects of rising fuel costs may take longer to materialize. Businesses have stocked up on inventory in anticipation of tariffs from President Donald Trump’s previous year, leaving them with ample supplies. This could delay the visible impact on other goods.
Historical parallels and possible measures
When the Russia-Ukraine war erupted in 2022, oil prices rose sharply, worsening existing inflation. At that time, many companies responded by reducing product sizes while maintaining prices—a tactic known as shrinkflation. However, with consumers already tightening their spending, businesses may struggle to implement such subtle adjustments without facing backlash.
As a result, more drastic actions could be taken to offset costs. “There’s no free lunch. It’s going to show up somewhere,” Bethune told CNN. This could mean layoffs or other cost-cutting strategies, as businesses seek to navigate the financial strain caused by the ongoing conflict.
