Gas Prices Top $4 Nationwide as Iran Tensions Hit Markets and Businesses

The surge in gasoline prices triggered by the conflict with Iran has begun to erode profit margins at small businesses across the country, according to new data from the Bank of America Institute. With the national average price of regular gas reaching $4.56 per gallon this week, owners of firms with fewer than 250 employees are absorbing sharply higher energy expenses at a time when labor costs are also climbing.

Small business profitability fell 1.3 percent in April, the steepest monthly drop in two years. That decline coincided with a 31 percent year-over-year increase in spending on gasoline, the Bank of America analysis found. The average price stood at $4.53 on Tuesday, up 43 percent from a year earlier, according to AAA data. All fifty states now report averages above $4 a gallon, with seven exceeding $5 and California reaching $6.15.

The price jump stems from supply constraints after the war closed the Strait of Hormuz, a vital shipping route for oil. Analysts at GasBuddy have warned that the national average could exceed the all-time record of $5.03 if the blockade lasts into midsummer. The pattern has produced steady weekly increases, including a 51-cent rise over the past month alone.

These costs arrive as small firms already navigate uneven demand. Sales growth has slowed even while overall consumer spending remains relatively strong, the Bank of America report noted. Entrepreneurs continue to cite labor shortages and uncertainty about future conditions as primary concerns. The sector's performance matters because businesses with fewer than 250 workers have accounted for half of net job creation over the past five years.

Yet the broader picture of entrepreneurship remains resilient. Americans filed paperwork for new businesses at an average rate of 470,000 applications per month in 2025, roughly two-thirds above pre-pandemic levels. That pace has helped distinguish the U.S. economy from slower recoveries elsewhere. The same forces that lift startup activity, such as flexible labor markets and access to capital, may also give some owners room to adjust pricing or operations.

The retail sector offers a partial contrast. Target reported that same-store sales rose 5.6 percent in its latest quarter, the first positive reading in five periods, with strength in health, wellness, toys and baby categories. Digital sales grew nearly 9 percent, aided by same-day delivery options. Those results suggest that consumer traffic has begun to stabilize at larger chains, though smaller operators lack comparable scale to offset fuel and wage pressures.

Policy responses so far have centered on monitoring supply routes rather than direct relief for independent businesses. The combination of elevated energy prices and persistent hiring difficulties could test whether the recent wave of new firm formation translates into sustained employment gains. For now, the data show that the cost shock is concentrated among the very enterprises that have driven much of the recent labor-market expansion.