Gasoline prices soar as Strait of Hormuz closes due to Iran war
Gas prices are rising as Iran closes the Strait of Hormuz, threatening oil supplies and raising concerns about the impact on the global economy.
As the war with Iran enters its fourth week, some analysts warn that rising gasoline prices are likely to use up virtually all of the expected economic boost from higher-than-usual tax refunds this year.
A key part of the Trump administration’s tax and spending bill, the One Big Beautiful Bill Act of 2025, was a tax cut that would be given to consumers as a retroactive refund in 2025.
Economists at JPMorgan Asset Management even called this a “refund surge,” and they and others thought the stimulus it would provide could be strong enough to reignite inflation.
But on March 20, the US team at Oxford Economics wrote that the gas price shock had changed the equation.
“Average gas prices of $3.60 imply that consumers will need to spend about $60 billion more on gas in 2026, roughly offsetting the boost from rebates,” Bernard Yaross and Michael Pearce wrote. “Every $0.10 in gasoline prices increases spending on gasoline by about $12.3 billion, which is about 0.06 percent of consumer spending that cannot be spent on other goods and services.”
The national average for a gallon of gas at around noon ET on March 23 was $3.928, up $1 from the previous month.
Not everyone agrees.
“Tax refunds are expected to be an average of $1,000 higher than last year,” said Larry Adam, chief investment officer at Raymond James. “Even if gas prices remained at $4.00 per gallon through the end of the year, the cumulative impact of higher gas prices on households would be less than $1,000. We believe this is a highly unlikely scenario.”
However, Adam and his team still believe that rising gas prices are likely to widen the gap between the two pillars of the “K-shaped” economy.
“Low-income households are feeling the pinch, given that they spend a high percentage of their income on fuel and other necessities,” they wrote. “Higher-income households, which account for a disproportionate share of consumer spending, are less sensitive to what’s happening at the pump.”
The Pantheon Macroeconomics team points out that in 2023, gas spending accounted for 3.7% of spending among households in the bottom 10% of the income distribution, compared to just 1.5% among households in the top 10%.
Additionally, the Pantheon team wrote on March 20 that “the primary beneficiaries of this year’s tax refunds will be middle- and upper-income earners,” with lower-income households seeing relatively little increase in refunds.
