Costs are rising – and not just at the gas pump. A growing array of everyday expenses, from grocery shopping to airline baggage fees, are feeling the effects of tensions related to the Iran war.
That is because it is a central power in the world economy. If it is more expensive, as it is because of this conflict in the Middle East, so are goods and services that depend on movement, transportation or production. That’s… almost everything.
“What started as a disruption in the main electricity corridor is now spreading throughout the world economy,” the United Nations’ Trade and Development Unit wrote in a recent report.
Here’s a look at some everyday costs that have already gone up in the US — or may soon.
Gas
It’s been almost a month since the first US-Israeli attack on Iran, and filling your tank is expensive. At press time, the national average for a gallon of regular gasoline was about $4.12, according to AAA, up from just over $3 a month ago. Prices crossed the $4 threshold on March 31, marking the first time in four years that the national average has risen to that level.
But prices are not rising uniformly across the country. Differences in tax rates, distribution costs and the costs of turning oil into gas mean that some drivers pay more than others. For example, a gallon of regular gas averaged $6 a liter in California on Tuesday — the highest in the nation — while it cost $3.35 in Oklahoma.
Oil
The biggest pressure on fuel prices stems from the closure of the Strait of Hormuz, an important shipping route from Iran’s southern coast that carries about 20% of the world’s oil. The US produces most of the oil used for gas domestically, but crude is priced on the world market, meaning supply disruptions could drive up prices.
Experts say it could be weeks or months before the Strait is reopened and global production stabilizes. Still, rates aren’t expected to drop anytime soon, meaning drivers are likely to face continued volatility.
Sugar, milk and fruit
Food prices were already up 3% year-on-year in February. But the war in Iran adds new pressures that could push grocery bills higher.
The United Nations’ Food and Agriculture Organization reported that its global food price index rose for the second month in a row in March after several months of decline. “Energy-related pressures” have driven up prices for a variety of commodities, with sugar and vegetable oil seeing the biggest jumps, according to the report.
High oil prices increase food transportation costs, especially for items that require refrigeration or long-distance shipping. This is because the increase in the price of oil increases the cost of diesel, which generates farm equipment, as well as semi-trucks, trains and cargo ships that transport food across the country. Diesel prices have risen faster than gasoline, rising nearly 50% since the start of the war, according to AAA data. The national average was more than $5 per gallon on Monday.
Perishable items, such as fresh fruit, vegetables and milk, are particularly vulnerable. These products need to be kept cold during transport, and high electricity prices make refrigeration expensive.
Fertilizer and plastic
Fertilizer costs are also being pushed higher, as the closure of the strait disrupts an important global fertilizer trade route. Although the US produces most of the fertilizer it uses, prices are set on the global market (similar to the gas you use to fill up your car).
Prices for urea, a key fertilizer ingredient, have already risen more than 25% at the Port of New Orleans since late February, according to an analysis by the Carnegie Endowment for International Peace. Higher fertilizer costs make it more expensive for farmers to grow crops — a pressure consumers won’t feel right away but could translate to more expensive groceries down the line.
Even packaging materials such as plastic (derived from petrochemicals) are becoming more expensive, adding to the overall cost of getting food safely to the shelves. This combination of factors means that grocery bills may continue to climb higher in the coming months.
Airline fees
Jet fuel prices have risen close to crude oil since the start of the Iran war – in some cases double their pre-war levels – putting immediate pressure on one of the biggest operating costs of aviation.
Now, airlines are starting to pass those costs on to travelers. Several airlines have already increased baggage fees, which is a common way to reduce rising costs without increasing base fares.
JetBlue was among the first major US carriers to increase its baggage fees, with an increase from $4 to nearly $9. Most JetBlue travelers now pay at least $39 for the first checked bag on off-peak days and about $49 on peak travel times — up from $35 and $40, respectively.
United Airlines followed suit and increased the fee for checked bags for tickets purchased after April 3, adding $10 to the first and second checked bags and an additional $50 fee for additional bags.
Delta also announced Tuesday a $10 increase in first and second passenger checked bags, bringing the price to $45 and $55, respectively. These changes apply to tickets purchased on or after April 8.
Flight tickets
Some airlines are also renewing or increasing fuel surcharges – additional fees are added to tickets to help offset the rising cost of jet fuel. Hong Kong-based Cathay Pacific, for example, announced on March 26 that it would increase fuel surcharges on all flights by 34%.
“The fuel charge is an important way to reduce and recover part of our rising fuel costs,” the company said in a statement, adding that it would “review and revise” the charge every two weeks to reflect fuel prices.
Shipping packages
Package delivery can be very expensive soon, too. As fuel prices rise, shipping companies are increasingly increasing or adjusting fuel costs to offset higher travel costs.
The US Postal Service said on March 25 it plans to add a temporary 8% fee to services including Priority Mail, Ground Advantage and Parcel Select. Pending approval from the Postal Regulatory Commission, the charge will go into effect from April 26 to Jan. 17.
The agency said the temporary price increase “is in line with industry practices.” Private carriers like FedEx and UPS have long used fuel surcharges — and both have increased those charges as fuel costs have risen, according to the report. The Wall Street Journal.
Amazon orders
Amazon is also going through high costs. The company recently announced a 3.5% fuel surcharge and refueling fee charged to third-party sellers in the US and Canada. The price increase will take effect on April 17.
“Higher costs in fuel and supplies have increased operating costs across the industry,” Amazon said in its announcement to retailers. “We have borne these increased costs so far. However, in common with other major carriers, where costs remain high, we apply temporary charges to our filling fees to offset part of the actual cost increases we experience.”
Housing prices
The war is starting to increase the cost of buying a house.
Mortgage rates have risen in recent weeks as headlines about rising oil prices fuel broader inflation concerns. A few days before the fight began, the average 30-year mortgage rate fell below 6% for the first time since September 2022. Since then, rates have rebounded to around 6.4%, according to Freddie Mac.
Mortgage rates typically track yields on US Treasury bonds, which rise when investors expect higher inflation. As those yields rise, the cost of borrowing for home buyers also rises. While gas prices can fluctuate, mortgage rates tend to be very sticky – they rise in anticipation of inflation and often take a long time to come back down.
Other borrowing costs
The effects may extend beyond mortgage rates. The Federal Reserve has signaled it will keep interest rates on hold for the time being as it assesses the economic impact of the war. Recent comments from Fed Chairman Jerome Powell suggest that policymakers take a wait-and-see approach, noting that the central bank is focused on looking beyond short-term energy changes and paying attention to inflation and the labor market.
The Fed’s next meeting is set for April 28 and 29.
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