Gas Prices Likely to Remain High Even After Iran Conflict Ends

Economists warn that spiking gas prices will eat up tax refunds, leaving most Americans with little extra to spend.

Mar. 22, 2026 at 12:35pm

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Spiking gas prices in the U.S. are on track to eat up tax refunds this year, leaving most Americans with little extra to spend. Economists now expect slower growth this spring and for the year as a whole, as dollars spent on gas are less likely to be used for other discretionary spending. Lower and middle-income households are likely to be hit particularly hard, as they receive lower refunds while spending a greater proportion of their earnings on gas.

Why it matters

The gas price spike comes at a time when many consumers are already in a precarious financial position, with maxed-out credit cards and increased reliance on 'buy now, pay later' options to cover basic expenses. This will likely worsen the 'K-shaped' narrative around the U.S. economy, where higher-income households have fared better than lower-income households.

The details

Gas prices have soared since the start of the Iran war on February 28, with the nationwide average price reaching $3.94 per gallon on Sunday, up more than a dollar from just a month earlier. Economists expect gas prices to remain elevated for some time, even if the war ends soon, as shipping and production have been disrupted and will take time to recover. This will result in slower economic growth, as dollars spent on gas are less likely to be used for restaurant meals, new clothes, or entertainment.

  • The Iran war began on February 28, 2026.
  • Gas prices reached a nationwide average of $3.94 per gallon on Sunday, March 22, 2026.

The players

Alex Jacquez

Chief of policy at the left-leaning Groundwork Collaborative and a former economist in the Biden White House.

Neale Mahoney

Director of the Stanford Institute for Economic Policy Research.

Julie Margetta Morgan

President of The Century Foundation, a think tank.

David Tinsley

Senior economist at the Bank of America Institute.

Bernard Yaros

Economist at Oxford Economics.

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What they’re saying

“The energy shock is to going to hit those who have the least cushion. And it doesn't look like those tax refunds are going to be here to save them.”

— Alex Jacquez, Chief of policy at the Groundwork Collaborative

“When you start looking across the perspective from a consumer side, you're seeing people who have maxed out their credit cards, are using 'buy now, pay later' to purchase their groceries. They're making it work for now, but that can fall apart quite quickly.”

— Julie Margetta Morgan, President of The Century Foundation

“The longer these gasoline prices persist, the more that will gradually sap consumer discretionary spending.”

— David Tinsley, Senior economist at the Bank of America Institute

What’s next

Economists expect gas prices to peak in May at $4.36 per gallon, based on oil price forecasts by Goldman Sachs, followed by slow declines for the rest of the year.

The takeaway

The gas price spike will likely worsen the 'K-shaped' recovery of the U.S. economy, where higher-income households have fared better than lower-income households. This will put further strain on consumers who are already in a precarious financial position, with maxed-out credit cards and increased reliance on 'buy now, pay later' options to cover basic expenses.