By Teresa Rivas
For Americans worried about the war in Iran, retail therapy doesn't look like the answer.
Concerns about the rippling impacts of the war in Iran has pushed the S&P 500 down nearly 3% in the past month, but retailers are feeling the brunt of the pain. The State Street SPDR S&P Retail exchange-traded fund is off nearly 9% over that span, while the State Street Consumer Discretionary Select Sector SPDR Income ETF has fallen more than 4% as investors fear higher gas prices will dent consumer spending.
It's a sharp reversal from just a few weeks ago, when the setup for retailers looked bright as higher tax refunds seemed poised to provide plenty of extra pocket change. Now, with crude prices up nearly 40% and gasoline jumping at least 17% on average since the crisis began at the end of February, investors are understandably worried.
While the U.S. is a crude exporter and won't run out of fuel regardless of the situation in the Strait of Hormuz, American shoppers will still feel the pain from climbing global oil prices, beyond what they pay at the pump.
"That leaves less money for spending outside gas stations and will discourage holiday travel," notes Gavekal Research's Will Denyer. "The consumer discretionary sector has historically tended to underperform when oil prices rise significantly, and that pattern has not changed since the U.S. became a net petroleum exporter in 2020."
For example, the consumer discretionary sector was a laggard during the last big spike in oil prices, rising less than the broader market in 2021 and falling more than average during 2022's bear market.
Add to the mix concerns that stock market declines are hurting the wealth effect -- when Americans feel free to spend as the value of their portfolios rise. Plus, fuel-driven inflation could keep interest rates elevated, which influence borrowing costs for consumers, writes Michael Pento, Pento Portfolio Strategies founder. That's a one-two punch for American shoppers.
"First, the roughly $350 worth of fiscal stimulus per taxpayer from the One Big Beautiful Bill is now going to be used to pay utility and gas bills instead of increased discretionary spending. And secondly, the higher inflation caused by spiking energy prices reduces the Federal Reserve's ability to cut interest rates," writes Michael Pento, Pento Portfolio Strategies founder. "In other words, the highly anticipated and well touted fiscal and monetary boost for the economy in 2026 is being canceled."
Another part of the issue is that the war now appears likely to drag on. While gas price spikes generally don't do much damage to consumption, prolonged higher energy prices do. The longer prices remain high, the more time there is for knock-on effects.
Morgan Stanley Global Economist Arunima Sinha notes that the uncertainty of war makes consumers likely to want to build up their savings. They are less likely to buy big-ticket items like cars that are suddenly pricier to use, and could be more expensive due to increased logistics and transportation costs. And while President Donald Trump had run his campaign on promises to address the cost-of-living crisis, recent moves like removing sanctions on Russian oil and plans to release 172 million barrels from the U.S. Strategic Petroleum Reserve over 120 days haven't done much to ease oil prices.
"The administration could lean on unilateral actions...to improve energy affordability, but these are likely to have limited impact," Sinha writes.
The end result will likely be a pullback in consumers' spending on things they want, even if they have to keep buying essentials.
Overall "an increase in gas prices acts as a tax on the consumer," notes Sinha's colleague Michelle Weaver. She adds that eating out is one of the categories most likely to see customers cutting back, followed by travel, clothing, footwear, and electronics.
Little near-term relief seems likely then for industries that have already been hit, like airlines, hotels, and restaurants. The AdvisorShares Hotel ETF; US Global Jets ETF; First Trust Nasdaq Food & Beverage ETF; AdvisorShares Restaurant ETF; VanEck Retail ETF; and Vanguard Consumer Discretionary Index Fund ETF all down more than the broader market over the past month -- along with the State Street retail and consumer discretionary ETFs.
The war may be thousands of miles away, but its effects quickly make their way to the local mall -- to stores' and shoppers' regret.
Write to Teresa Rivas at teresa.rivas@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 14, 2026 03:00 ET (07:00 GMT)
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