Americans Warned Over Yearslong ‘Iran Tax'

The Iran war-and the surge in fuel prices it has resulted in-has sparked warnings from economists and think tanks that the fallout could effectively be acting as a new, long-term tax on American households.

In addition to gas, officials have expressed fears that the now nearly three-month conflict could push up inflation across the economy and limit the hopes of interest rates dropping in 2026, fears that were underscored by the latest consumer price index (CPI) from the Department of Labor.

The report found that inflation had overtaken wage growth for the first time since 2023, eliminating the benefit of any pay increases Americans enjoyed over the past year.

And according to the economist Justin Wolfers, a professor at the University of Michigan's Gerald R. Ford School of Public Policy, Americans may be dealing with this "Iran tax" for "months and probably years."

How Much Is the War Costing Consumers?

The primary price impact from the war is in energy. Oil prices have risen significantly since Tehran began preventing ships from traveling through the Hormuz Strait-through which roughly 20 percent of global supply typically moves-and this has in turn pushed up domestic costs at the pump.

According to the AAA, the national average price for a gallon of regular unleaded has risen from under $3 before the conflict began to $4.49, though this dipped in recent days on hopes of a breakthrough in negotiations.

Researchers at Brown University's Watson School of International and Public Affairs estimate that consumers have paid close to $48 billion in additional fuel costs since the conflict began on February 28. This is mostly in gasoline, but also diesel, the price of which has likewise risen over 50 percent, together resulting in an average burden of $364.40 per U.S. household.

And according to Roger A. Pielke Jr., a political scientist and senior fellow at the American Enterprise Institute (AEI), the combined impacts on gas and other products like jet fuel and fertilizer means households are paying roughly $410 extra each month on average.

The experiences of Americans at the pump and grocery aisle have pushed up consumer inflation expectations-year-ahead forecasts rising to 4.8 percent in the University of Michigan's latest survey. And official forecasts from the Department of Agriculture indicate that prices on a number of goods are also set to rise by more than previously expected.

Analysts Warn of Long-Term Economic Effects

The administration maintains that once its military objectives are secured and the war comes to a close, the price of gas and any other affected commodities will drop back to pre-conflict levels.

In late April, President Donald Trump said prices would “drop like ⁠a rock” ​as soon ​as the war concludes, and told attendees at a recent event that these "are going to tumble as soon as I finish up with Iran."

In early May, National Economic Council director Kevin Hassett said that a resumption of regular shipments through the Hormuz Strait in particular would see fuel costs fall "relatively quickly" and well ahead of the midterm elections in November.

No Quick End to High Prices

But many observers feel that the economic impacts could linger even if there is a swift resolution.

"Even if the war ended tomorrow, there would remain a risk premium in oil prices given the concern that the Iranian regime can close down the Strait of Hormuz and impair global oil production at will," Mark Zandi, chief economist at Moody's Analytics, told Newsweek last month.

Mark Blyth, a professor of international economics at the Brown University, told Newsweek that in addition to oil, the Hormuz Strait closure had cut off supplies of plastic and petrochemical feedstock, as well as fertilizer inputs, setting the stage for food price hikes down the line as farmers contend with tighter margins.

"Even if all this stopped tomorrow it could take up to year to normalize supply," he said.

And speaking to MS Now last week, Wolfers said that while the war ending would result in falling fuel costs, the decline would not be as swift as the administration has previewed.

"What you hear out of the White House is [that] as soon as things clear up in the Middle East…what we'll see is oil prices coming down," Wolfers said. "That part is true, but they're not going to come down very quickly."

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This story was originally published May 26, 2026 at 10:30 AM.