U.S. consumers are feeling the financial strain from the ongoing war with Iran, facing significant pressure due to rising oil prices and increasing Treasury yields. Since the conflict reignited, crude oil prices have surged, causing gasoline and diesel prices to hit highs not seen for years. The 10-year Treasury yield also spiked to its highest level since 2007, raising borrowing costs for major purchases like homes and cars. Moody's Analytics estimates that the combined cost of these factors totals roughly $1,760 per household, with energy expenses accounting for more than half of the burden, followed by higher interest rates and increased military spending.

Crude oil prices topped $105 per barrel recently, pushing the average U.S. gas price to over $4.32 per gallon, a 36% increase from one year ago. Diesel prices have set records above $6 per gallon, which could lead to broader price hikes as trucking costs rise. Inflation is broadening due to higher energy costs, with airfare prices jumping over 23% year-over-year in August and grocery prices expected to climb as well. Surveys show that gas prices are increasingly affecting consumer sentiment, contributing to worries about the affordability of everyday expenses.

The jump in Treasury yields has compounded financial difficulties by making loans more expensive. The 10-year yield surpassed 4.9%, driving mortgage rates above 7% for the first time in over a year, further tightening housing affordability during an already challenging market. Consumers also expect borrowing costs to rise, with demand for big-ticket items weakening. Higher interest rates may lead companies to curb hiring, creating a more cautious job market and limiting wage growth, which adds to consumers’ financial constraints.

Despite the boost from larger tax refunds linked to President Donald Trump's recent tax legislation, economists warn that rising energy prices have wiped out much of that benefit, particularly impacting lower-income households who spend more income on fuel. With inflation outpacing wage growth, real earnings have declined, forcing many Americans to dip into savings that are nearing historic lows. This dynamic suggests consumers may soon need to reduce spending, which could weigh on the broader U.S. economy given its heavy reliance on consumer demand.