The most recent CPI report shows inflation reached 3.7% year over year in September. That’s up from 2.4% in February, when the war in Iran began. While consumers have noticed the impact of the Iran war most when it comes to rising gas prices, the effects have been felt in other areas of household budgets as well, from airfare to food.
That’s driven primarily by the rising oil prices resulting from the Strait of Hormuz closure. Brent crude oil was selling for $72.87 per barrel on the eve of the war (February 27). By March 20, it had soared above $112. After briefly dipping back down to its pre-war prices in July, it quickly shot back into the triple digits by August and is now trading above $109 in October.
As we near the end of the year and the war drags on, the Iran conflict continues to have a ripple effect on the economy. But just how much have prices changed for Americans since the war began on February 28? And how much longer should you expect costs to remain high? Here’s a look at the data to help you anticipate where your budget is being hit hardest.
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Gasoline and diesel skyrocketed since the start of war in Iran
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Gas prices are up more than 46% since the war began, with the national average jumping from $2.93 on February 23 to $4.29 on October 19, according to AAA. That makes sense, as gas prices are determined primarily by crude oil prices, which make up over half the cost you see at the pump.
That also means that the price you pay can rise and fall quickly in response to changing oil prices. So this is one cost that could come down relatively fast if the conflict were to end.
Diesel prices have also skyrocketed, jumping 66% in the same time period. Even if you don’t own any diesel-powered vehicles or equipment, nearly 80% of U.S. farm products will end up on a diesel-powered truck at some point in their journey from the farm to your table.
Likewise, the vast majority of the products you buy are transported on diesel-powered trucks. So nearly everything you buy is going to be impacted to some degree by those soaring diesel prices.
Heating oil and natural gas prices increased since the war in Iran
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As we head into winter, you’ll also start to see the impact of the war on your heating bill. Home heating oil prices have more than doubled from January to September of this year, soaring 128% since the beginning of the year, according to data from the Federal Reserve.
Similarly, residential natural gas prices jumped 77% from February to July, the most recent month for which data is available from the U.S. Energy Information Administration. Granted, this follows a similar trend of seasonal natural gas price fluctuations in previous years, so it remains to be seen whether prices will fall as they typically do going into fall and winter.
With those utility bill spikes in mind, now is a good time to compare your current rates for electricity and gas and make a plan for heating your home this winter. For example, if your rates have risen dramatically, this could be a good year to invest in an electric heater that you can move from room to room with you rather than heating the entire house.
You should also take this time to check in on your setup with your current provider. It may be worth shopping around and seeing what companies’ fixed-rate price options are, although it’s hard to predict if locking in a rate will be worth it since we don’t know what will happen with the conflict.
Grocery prices changes since the war in Iran
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The Bureau of Labor Statistics food at home price index has only shown a slight uptick so far, rising 1.1% since the start of the war. Overall, it’s up 5.2% since Donald Trump took office in January 2024 and nearly 32% since the start of the pandemic in 2020.
Grocery prices have been an increasing strain on American wallets for years now, and the impact of the Iran war is likely not fully accounted for in today’s costs yet, meaning more inflation is likely to come.
Why will the Iran war impact your grocery bill? Fertilizer, pesticides and feed are all dependent on either materials derived from petrochemicals (like urea in fertilizer) or supply chains that require transit through the Strait of Hormuz. Fertilizer alone accounts for roughly 30% of the cost of producing staple crops like corn and wheat. In turn, animal feed, which is typically made up of corn or soybeans, represents at least 60% of livestock production costs.
That means every item on your plate is being impacted by rising oil prices and the closure of the strait. Tack on those soaring diesel prices when it comes time to transport that food to your nearest grocery store, and you’re looking at even higher costs.
Between rising fertilizer and diesel prices, S&P Global anticipates just about every major food product could see even higher price hikes going into next year as the crops treated with this year’s more expensive fertilizers become ready to harvest.
Airfare and other travel has gotten more expensive
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Jet fuel prices have nearly doubled since February, reaching $192.44 per barrel this month, according to the International Air Transport Association (IATA). The IATA estimates that jet fuel alone accounts for about 30% of an airline’s operating costs.
For consumers, that means rising ticket prices. The consumer price index for airfares shows ticket prices rose nearly 17% from January to September. The airfare price index is now even higher than it was after the oil price shock of 2022 following the Russian invasion of Ukraine.
It might not just be your plane ticket that gets more expensive, either. Uber and Lyft have in the past added temporary fuel surcharges to the price of a ride when gas prices soar dramatically. While neither rideshare service has announced such a surcharge this fall, it is something to watch for as fuel prices remain elevated.
Brace for prices to remain high even after the war
While the price of oil can rise and fall quickly on each development in the war, the downstream effects on prices take a little longer to show up and longer to level out again. So, even if the U.S. and Iran strike a deal tomorrow, you should still budget for conflict-related inflation to continue for at least another year or two.
According to the Federal Reserve, every permanent 10% increase in the price of Brent crude oil leads to a 0.4% rise in the consumer price index. This “pass-through effect,” as the Federal Reserve calls it, can be slow to materialize, but also long-lasting. While some costs might be quicker to come back down – like gas prices – others will likely take longer to stabilize, like food prices.