Iran War Adds Nearly $2,000 to Average U.S. Household Costs

Moody’s Analytics chief economist Mark Zandi estimates that the war with Iran has cost the average U.S. household the equivalent of almost $2,000. He attributes $1,100 to higher energy prices, $540 to higher interest rates and $360 to military costs.

Fuel and travel costs

The energy portion of that burden is growing by $50 a week at current fuel prices, Zandi said. AAA reported that regular gasoline averaged $4.33 a gallon on Friday, 45% above its prewar level, while diesel averaged $6.33, up 68%.

Higher diesel prices also raise the cost of moving goods. The Energy Information Administration expects winter heating costs to be 21% higher for the roughly 3% of U.S. households that use heating oil, assuming mild weather.

Air travel has also become more expensive. The consumer price index showed airfares were about 22% higher in September than a year earlier. Average domestic fares, excluding optional fees, rose from $405 in late 2025 to $445 in the second quarter of this year, according to the U.S. Bureau of Transportation Statistics.

United Airlines cut some December flights and warned of possible further reductions in 2027. Analysts said fuel-price volatility could make it harder for airlines to plan and discourage fare cuts, while fewer seats could reduce pressure on ticket prices.

Costs across consumer goods

The U.S. Department of Agriculture now expects grocery prices to rise 2.4% this year, up from its initial 1.7% estimate. Cornell professor Chris Barrett said it was surprising prices had not risen faster given higher diesel, fertilizer and refrigeration costs. He suspects retailers are absorbing some increases to avoid alienating customers.

Footwear prices were 3.4% higher in September than a year earlier, with men’s shoes up 4.5%, according to the consumer price index. The footwear trade group said oil prices, tariffs and geopolitical uncertainty are likely to keep retail shoe prices rising into 2027.

Businesses have also faced higher shipping charges. September producer-price data showed transportation and warehousing costs for goods sold to businesses as inputs were 10.2% above a year earlier. AFS Logistics and TD Cowen project record parcel costs this quarter, while AFS said holiday fees and tight trucking capacity may keep shipping bills elevated even if fuel prices ease.