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

Small business owners across the country are absorbing sharp hits to their bottom lines as gasoline prices climb higher amid the ongoing war with Iran and the resulting closure of the Strait of Hormuz. New data from the Bank of America Institute shows small business profitability dropped 1.3 percent in April, the steepest decline in two years, driven largely by energy costs and persistent labor pressures.

The national average price for regular gasoline reached $4.56 a gallon on Wednesday, according to AAA, with every state now reporting averages above $4. Seven states have crossed the $5 threshold, and California leads at $6.15. Prices have risen 53 percent since the conflict began three months ago, leaving small firms that rely on delivery fleets and daily operations paying 31 percent more for fuel than they did a year earlier.

These increases come at a moment when many entrepreneurs are already navigating higher wages and uncertain demand. Analysts at the Bank of America Institute noted that small business sales appear to be slowing even as overall consumer spending remains relatively strong. The combination leaves owners with thinner margins and fewer options to pass costs along without risking customer loss.

The economic strain extends beyond individual shops. Businesses with fewer than 250 employees have accounted for half of all net new jobs created over the past five years. When those firms face sustained cost pressures, the effects ripple through local hiring and wage growth. Several sectors that depend on transportation, including retail suppliers and service providers, report cutting back on expansion plans as diesel and gasoline expenses eat into cash flow.

GasBuddy analyst Patrick De Haan warned this week that the national average could surpass the all-time record of $5.03 if the Hormuz blockade continues into midsummer. Such an outcome would compound the inflation already visible in food distribution and construction materials, further complicating efforts by smaller operators to stabilize prices.

Despite the headwinds, applications to form new businesses remain near record levels, averaging about 470,000 per month in 2025. That pace, well above pre-pandemic norms, underscores the enduring appeal of entrepreneurship in the United States. Yet the same data also reveal that many of these ventures are entering an environment of elevated operating costs that could test their survival rates in coming quarters.

Large retailers present a contrasting picture. Target reported first-quarter net sales growth above 6 percent and posted its first positive same-store sales figure in five quarters, aided by strength in health, wellness, and baby categories. The company’s membership and same-day delivery services helped lift traffic both online and in stores. Such gains at major chains, however, have not translated evenly to the smaller suppliers and local merchants that feed into the broader supply chain.

With Memorial Day weekend approaching, drivers face another round of seasonal price volatility layered on top of geopolitical disruptions. The cumulative effect is a steady transfer of resources from household and small-business budgets to higher energy expenditures, a shift that shows little sign of easing while shipping lanes remain constrained.