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Retail sales rose in February before the Iran war, which threatens to derail spending

[April 02, 2026] By ANNE D'INNOCENZIO

NEW YORK (AP) — Shoppers increased their spending in February before gasoline prices spiked because of the attacks on Iran by the U.S. and Israel.

Retail sales rose a better-than-expected 0.6% in February, from a revised 0.1% decline in January, the Commerce Department said Wednesday.

Retail analysts say it was a strong showing given that inflation has rattled American households, but that the war in Iran may have dented the psyche of consumers with spending on gasoline racing higher over the past five weeks.

“While the overall numbers are good and suggest a continued trajectory of reasonable expansion for retail, they do not reflect the problems that have arisen since the start of the Iran conflict,” wrote Neil Saunders, managing director of GlobalData. “Since the start of March our own numbers show that consumer sentiment has soured and that rising gas prices are starting to spook consumers.”

This week the average price for a gallon of regular gasoline eclipsed $4, the first time it's done so since 2022, and it jumped another 4 cents overnight to $4.06, according to motor club AAA.

Yet before the Iran war began, sales at motor vehicle and auto parts dealerships rose a solid 1.2% in February. Excluding that sector, retail sales rose 0.4%

Business at clothing and accessories stores rose 2%, while sales at electronics and appliance stores were up 0.5%. Sales at online retailers rose 0.7%. And business at health and personal care stores were up 2.3%

The snapshot offers only a partial look at consumer spending and doesn’t include things like travel and hotel stays. But the lone services category – restaurants – registered an increase of 0.4%.

“This was a solid report,” Ksenia Bushmeneva, economist at TD Bank Group, wrote in a report published on Wednesday.

He noted that higher gas prices at the pump will likely lift overall sales in March since the government retail sales figures are not adjusted for inflation. But he said “real spending might take a hit as consumers look to offset higher fuel costs with reduced spending discretionary items, with spending on travel and recreation the most likely areas to be cut.”

The Iran war began Feb. 28 and has shut down the Strait of Hormuz, cutting off one-fifth of the world’s oil supply. The price for a barrel of Brent crude, the international standard, is up more than 45% since the start of the war. The cost of diesel fuel has risen faster than gasoline, driving up the cost of transportation for companies. Economists expect a related bump in inflation, potentially as soon as this month.

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Shoppers navigate packed aisles in the new H Mart, in Dublin, Calif., Thursday, March 26, 2026. (Brontë Wittpenn/San Francisco Chronicle via AP)

Economists had believed that an unusually large jump in tax refunds would kick start spending at the start of the year. But spiking gas prices will take a bite of that money.

“The hit to real incomes from higher gas prices is especially regressive, hurting lower-income households disproportionately, while the lift from tax refunds is more evenly spread,” Samuel Tombs, chief economist at Pantheon Economics, wrote in a recent report. “Moreover, refunds will slow to a trickle by late April, providing little protection if high prices persist.”

Patrick De Haan, an analyst at GasBuddy, which tracks fuel prices, noted that the way to gauge the impact of gas prices is how much gas expenditures account for a shopper’s income. He said that gas prices are approaching 3% of household medium income.

“When that gets up to about 4, 4 1/2, 5%, that’s really when people really start trimming back on some of their discretionary purchases,” he said.

Some retailers are already warning of the impact on their customers if gas prices keep rising.

Daniel Erver, CEO of Hennes & Mauritz, said last week that the Swedish fast fashion chain expects energy prices will have a “significant impact on the consumer behavior" if the war is prolonged.

And Darren Rebelez, CEO of the convenience store chain Casey’s General Stores, told investors last month that a significant pullback in customer spending is unlikely unless gas approaches $5 per gallon.

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