Fill it Up and Scale it Back: Consumer Spending in the Post-Hormuz Economy
As a college student with friends who live all over the country, I try my best every summer to plan a trip to see at least one of them. This summer, that came with an extra challenge. When I first started looking at flights, I knew off the bat that seeing my friends in Europe or on the West Coast was out of the question. After turning on my Google Flights price tracker notifications and comparing all my options, I settled on visiting a friend outside of Boston. From DCA to BOS, I was used to a round-trip ticket costing around $180. Compared to the $325 ticket I ended up purchasing, it was clear that I hadn’t adjusted my expectations to the current cost of travel.
For most Americans, gas is not an optional expense. With the stark increase in fuel prices, alongside relatively static incomes, households have been forced to adjust their habits at the pump to stick to pre-existing budgets.
According to a report by the Associated Press, members-only retailers such as Costco, Walmart’s Sam’s Club, and BJ’s Wholesale Club have seen an increase in traffic at their gas pumps, where fuel prices are typically lower than at independent gas stations. Not only has the price of gas influenced where consumers are filling their tanks, but also how they are doing so. Costco Chief Financial Officer Gary Millerchip noted a pattern of customers coming in to “top up in between what would have normally been a gap between getting the tank to empty,” reflecting the anticipation of price increases.
When looking at the Consumer Price Index (CPI) for July 2026, I was surprised to see that prices were relatively stable. Although the CPI rose .1% over the prior month, I had anticipated seeing prices of groceries, healthcare, housing, and other categories skyrocket – which was simply not the case. Instead, those categories showed far more modest changes than I anticipated. One notable exception that has been most heavily impacted by the surge in gas prices is the cost of air travel. Over the past twelve months, the CPI increased 3.4% across all items, while airline fares rose sharply, increasing 25.5% from July 2025.
Consumers who save all year for their summer vacations have been forced to adapt their plans as airfare prices surge, particularly for international travel. Since the Strait of Hormuz was closed, jet fuel prices have spiked 50%, significantly increasing airlines’ operating costs. That surge in jet fuel costs is the primary factor behind the 25.5% increase in airline ticket prices.
During the summer months, people are more eager than ever to use their PTO – whether that means relaxing on the beach, exploring a new city, or visiting family that lives far away. Despite the rising cost of travel, consumers have not stopped traveling altogether; rather, they have adapted their plans to fit the current economy. Travel remains a priority for many, but people are being forced to scale back their travel plans to stay within their budgets. NPR’s Stephen Basha spoke to a travel agent who reported a 10.5% decrease in fall bookings, along with a clear avoidance of “long-haul, far-off destinations”. Alternatively, spending on travel has pivoted towards more budget-friendly options, such as staycations and trips to nearby destinations.
As the summer ends and travel begins to slow for many consumers, the impact of the war in Iran and the subsequent increase in gas prices will continue to influence household spending well beyond travel. Although the rise in costs has been less abrupt in other categories, prices for groceries, retail goods, healthcare, and transportation continue to fluctuate and remain elevated. Consumers will be forced to meticulously plan and shift their budgets and lifestyles to account for the higher cost of living.
Uncertainty related to the trajectory and timeline of the war in Iran leaves consumers in the dark as to the future of prices. Until the Trump administration agrees to a deal with Iran that has the support to move forward, uncertainty is likely to persist, making the outlook for inflation, consumer spending, and the broader economy difficult to assess.
