Earlier this year, the White House declared what it described as the largest tax refund season in American history. The celebration centered on the One Big Beautiful Bill Act, a sweeping piece of legislation promising the typical household hundreds of dollars more in refunds. For millions of Americans, it felt like a rare financial win. That feeling may not last long.
Economists are now warning that rising gasoline prices, driven largely by the ongoing military conflict involving Iran, could effectively cancel out those gains before most households ever feel them.
What the numbers actually say
Researchers at the Stanford Institute for Economic Policy Research ran a sobering analysis. If the Strait of Hormuz remains closed for several more weeks and oil climbs to around $110 per barrel, gasoline could peak near $4.36 per gallon by May. Under that scenario, the average American household would spend roughly $740 more on gas this year compared to last. That figure sits uncomfortably close to the $748 in additional tax refunds that the Tax Foundation projected for a typical household under the new law.
Analysts at Oxford Economics arrived at a similar conclusion through a different lens. If gasoline prices average around $3.60 per gallon for the year, American consumers would collectively spend $60 billion more at the pump in 2026, almost exactly offsetting the refund boost most families were counting on.
Since late February, when the United States launched a major military operation against Iran alongside Israeli forces, gasoline prices have climbed more than 90 cents to roughly $3.91 per gallon. The conflict has effectively shut down the Strait of Hormuz, a narrow waterway responsible for transporting more than 20 percent of the world’s oil supply. Oil prices have hovered near $100 per barrel and briefly spiked above $115 this week, reaching levels not seen since 2023.
Gasoline costs hit some households far harder
The burden of these rising prices will not fall evenly. Lower and middle income Americans stand to absorb the sharpest blow. The bottom 80 percent of earners spend close to 4 percent of their household budgets on gasoline, nearly double the share spent by higher income counterparts.
That gap matters because the tax benefits embedded in the legislation tend to flow upward. Provisions tied to overtime pay and state and local tax deductions are structured in ways that primarily advantage middle and upper class filers. Analysts say this dynamic deepens an already visible split in consumer spending patterns, where wealthier households continue increasing their spending while lower income families struggle to keep up.
Why gasoline prices are unlikely to drop anytime soon
Even an end to the conflict would not immediately ease pressure at the pump. A backlog of oil tankers has built up near the strait, and clearing that congestion could take weeks. Infrastructure damage in the Gulf region may also slow the recovery of oil production capacity. The Energy Information Administration projects gasoline will average $3.34 per gallon this year and $3.18 in 2027. Goldman Sachs analysts have suggested oil could remain above $100 per barrel through 2027 if supply disruptions continue.
The administration has moved to address the situation on multiple fronts. The White House temporarily suspended the Jones Act, a century old federal law that restricts domestic maritime shipping to American flagged vessels. By allowing foreign ships to operate on domestic routes, officials hope to ease supply bottlenecks and reduce shipping costs. Policy analysts, however, remain skeptical. One estimate suggested the move would lower gasoline prices by roughly three cents per gallon.
What comes next
Vice President JD Vance recently met with oil industry executives to discuss prices, acknowledging publicly that Americans are feeling the strain. The administration has pledged to pursue every available tool to bring costs down.
Whether those efforts move fast enough to protect the financial relief that millions of households were promised remains an open question, and for many, an urgent one.
