Walmart warns US shoppers cut spending as gas prices from Iran war bite

Walmart has warned that higher gasoline prices tied to the continuing war with Iran are prompting U.S. consumers to reduce spending elsewhere, squeezing household budgets.

The retail giant expects its sales growth between May and July to slow significantly from the previous three months, citing elevated prices at the pump as the primary cause.

The conflict in the Middle East has driven a surge in wholesale oil prices, which in turn has raised the cost of gasoline for Americans.

Data from motoring group AAA shows the average price of a gallon of gas has hit $4.56 (£3.40), up from $3 when the war began.

In an interview with CNBC, Walmart finance boss John David Rainey said the rising cost of living had so far been offset by higher tax returns resulting from tax cuts in President Donald Trump’s One Big Beautiful Bill Act (OBBBA).

But he warned shoppers would face increasing strain as that effect drains away in the current financial quarter.

“I think higher tax returns muted some of the pressure related to higher fuel prices and as we’re in a period of time right now where those tax refunds are largely not coming in, I think consumers are going to feel more of that pressure from higher fuel prices,” he said.

The retailer was “keeping a close eye” on gas prices but expects them to remain high for the coming months, Rainey said.

Walmart is the largest private employer in the U.S. and one of its biggest retailers, so its earnings offer insight into how American consumers are being affected by the fallout from the Iran war.

On a call with investors, Rainey also warned that if the closure of the Strait of Hormuz continues, it could force the retailer to hike food prices due to shortages of fertilizer, nitrogen and phosphates.

Walmart’s first-quarter profit, from February to April, was $5.3 billion, up 18.8% compared with a year earlier.

Sales in the quarter rose by 7.3% year-on-year to $177.8 billion, the retailer said.

But it warned this rate of growth would slow to between 4% and 5% between May and July as the rising cost of living begins to bite.

The company’s shares fell by 7% on Thursday morning in response to the worse-than-expected guidance.