Global oil prices have surpassed $100 a barrel, driven by renewed conflict and military strikes in the Middle East that have disrupted oil supplies. This surge is poised to increase costs for consumers on essential goods such as groceries and gasoline, and impact seasonal purchases like back-to-school items.
The international benchmark Brent crude last traded above $100 a barrel in May. The current escalation follows a period of lower oil prices in June when hostilities between the U.S. and Iran had waned. Companies in sectors including fresh food, school supplies, and shipping are reporting increased operational costs due to earlier energy price spikes and anticipate passing these expenses on to consumers.
"In general, once you have an increase in costs, businesses are fast in increasing the price," said Miguel Gomez, director of Cornell University’s Food Industry Management Program. He added that it typically takes longer for prices to decrease when costs decline.
Gasoline and Grocery Impacts
Volatility along the Strait of Hormuz and broader regional instability have contributed to the rise in crude oil prices, the primary component of gasoline. The average U.S. price for regular gasoline reached $4.09 per gallon, a 15-cent increase from the previous week, with most states reporting prices at or above $4. Pavel Molchanov, an investment strategy analyst at Raymond James, indicated that pump prices are likely to continue rising into the following week, though futures prices suggest a potential decrease once military actions conclude.
Despite the higher costs, gasoline demand saw a 1% increase to 8.9 million barrels per day last week, according to the U.S. Energy Information Administration. The availability of refineries to process crude oil has also been impacted, with some in the Middle East damaged and others in Russia affected by Ukrainian attacks.
Grocery prices are also expected to climb as oil prices increase. Farmers rely on diesel fuel for equipment, and a significant portion of food products are transported via trucks. "Oil at $100 doesn’t make food prices jump right away, but it does put upward pressure across the food supply chains, especially for categories that depend heavily on trucking, cold storage and packaging," Gomez stated. Perishable goods like fresh produce and dairy, which require refrigeration during transport, may see a more pronounced effect. Imported goods, such as olive oil, are also subject to higher shipping costs.
Albertsons, a grocery chain, recently lowered its 2026 fiscal outlook, citing pressure on its core business and a slowdown in consumer spending.
Broader Economic Effects
Higher fuel costs for ships, trucks, and air carriers translate to increased expenses for consumers and businesses relying on shipping services. Companies like UPS and FedEx have implemented fuel surcharges. According to the AFS Logistics and TD Cowen Freight Index released July 14, truckload pricing is at a four-year high due to rising fuel costs and capacity limitations. Diesel prices in the second quarter were approximately 51% higher than in January and February, while jet fuel prices rose 90% from the previous year.
Retailers are observing a shift in consumer behavior. Tractor Supply Co. reduced its annual sales outlook, attributing it partly to higher fuel prices impacting customer spending during the spring selling season. The company noted that its customers, who often drive longer distances, are particularly sensitive to increased fuel costs. While spending on pets, animals, and property remains consistent, shopping habits have become more deliberate, with customers consolidating trips and prioritizing essential purchases.
The footwear industry is also facing challenges, with the Footwear Distributors and Retailers of America trade group warning of increased freight and material costs. Some members have reported a more than 25% price increase for petroleum-based materials used in footwear manufacturing due to the Middle East conflict, potentially leading to a roughly 5% increase in the cost of finished footwear products. Companies are also accelerating imports to mitigate potential tariff increases.
Airlines have responded to rising fuel costs by increasing fares and fees, and by trimming less profitable routes. American Airlines reported a significant decline in second-quarter net income despite record revenue, noting that higher fares only offset about half of its increased fuel expenses. Despite these adjustments, jet fuel demand in the last four weeks has increased by 9% compared to the same period last year.