Rising fuel costs tied to Middle East instability are pushing gas prices toward $4 a gallon, and Costco is already warning shoppers about what comes next
Gas prices are climbing fast, grocery bills are creeping higher and one of America’s most trusted retailers is sounding the alarm. Costco’s chief financial officer has issued a direct warning to shoppers about the potential impact of ongoing Middle East instability on fuel costs and supply chains, and analysts say the worst may still be ahead for consumers already stretched thin at the pump.
The national average for a gallon of regular gasoline jumped nearly 27 cents in a single week to $3.25, according to data from AAA — a spike not seen since March 2022, when the Russia-Ukraine conflict sent energy markets into a tailspin. That price now matches levels last seen in early April 2025, and forecasters say it is unlikely to stop there.
Why gas prices are surging so quickly
The catalyst behind the current spike is U.S. and Israeli military strikes on Iran, which sent global crude oil prices sharply higher. While the United States has significantly reduced its dependence on Middle Eastern crude over the years, it remains deeply connected to global energy markets — and what happens in that region still ripples outward in ways American consumers feel directly.
When Asian and European refineries face supply disruptions, demand for U.S. oil exports increases, pushing domestic prices higher in the process. That dynamic is playing out in real time, and the effects are already showing up at gas stations nationwide.
Analysts at GasBuddy warned that the national average could climb toward $3.50 to $3.70 per gallon in the coming days if oil continues rising and supply disruptions persist. A former energy adviser to both the Obama and Biden administrations went further, telling CNBC’s Squawk Box that American drivers should expect to be paying $4 a gallon by the weekend — a projection echoed by reporting from The Wall Street Journal. One adviser went so far as to describe the potential fallout as the biggest energy shortage in history.
Costco’s warning and what it means for shoppers
During the warehouse club’s second-quarter earnings call, Costco CFO Gary Millerchip delivered a mixed message. On the positive side, he noted that overall inflation had decreased slightly in the most recent quarter, driven by deflation in produce, eggs and dairy — a welcome development for budget-conscious households. The company has also seen strong unit and market share growth in eggs despite price deflation weighing on sales figures.
The warning, however, was pointed. Millerchip cautioned that the situation in the Middle East could impact fuel costs and shipping schedules if instability in the region persists for a sustained period. While Costco‘s supply chain remained relatively stable heading into spring, the CFO made clear that the back half of the fiscal year carries meaningful uncertainty tied directly to what happens overseas.
How rising gas prices hurt household budgets
The impact of surging fuel costs extends well beyond the gas station. Higher energy prices ripple through supply chains, raising the cost of transporting goods and increasing overhead for businesses large and small — costs that ultimately get passed on to consumers. Economists describe the effect as functioning like a tax on household budgets, with families responding by pulling back on discretionary spending in other areas. Overall consumer spending tends to decline as a result, creating a drag that extends across the broader economy.
How Costco plans to fight back
Despite the turbulence, Costco is positioning itself to absorb as much pressure as possible rather than passing costs directly to members. The retailer’s Kirkland Signature private label brand remains a central part of that strategy, with the CFO noting that Kirkland items typically offer 15% to 20% in savings compared to national brand alternatives while maintaining equal or better quality. The company launched approximately 30 new Kirkland Signature items in the second quarter alone, including crispy wings, blackened salmon and various apparel items.
Costco‘s leadership also reaffirmed its commitment to being among the first retailers to lower prices whenever the opportunity arises — a pledge that will matter considerably more if fuel and shipping costs continue to climb in the weeks ahead.
Source: The Street