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By Giulia Carbonaro
Senior Reporter
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The surge in gas prices that has followed the start of the Iran war could completely wipe out larger tax refunds under President Donald Trump’s One Big Beautiful Bill (OBBB), a new study from economists at Stanford University has found—with a White House spokesman telling Newsweek the president had "always been clear about temporary disruptions" coming from the conflict.
Why It Matters
In late January, the Trump administration boasted about giving American households the “largest tax refund season in U.S. history” this winter, citing estimates by the Tax Foundation saying that the average taxpayer will receive $3,800 in refunds for fiscal year 2025, up from $3,052 in 2024.
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That estimate was on the higher side: according to the most recent data from the Internal Revenue Service, refunds are now about $360 larger on average than at the same time last year. Whatever the exact sum might be within this range, a group of Stanford University economists now say that any additional savings for American taxpayers introduced with the OBBB would be erased by higher prices at the pump.
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What To Know
In the days and weeks following the U.S. and Israel’s joint strikes on Iran on February 28, which sparked the start of the ongoing conflict in the Middle East that has almost completely choked traffic in the crucial Strait of Hormuz, crude oil prices have jumped to over $100 per barrel.
This increase has in turn fueled gas and diesel price hikes all over the world, including in every U.S. state. At the national level, gas prices have risen by over one dollar in the past month, according to the American Automobile Association. As of Tuesday, the average gas price nationwide was $3.977 per gallon, up from $2.951 a month earlier.
According to Jared Bernstein, former Council of Economic Advisers chair under Joe Biden, and Stanford University researchers Caleb Brobst and Ryan Cummings, the typical U.S. family will pay an extra $68 this month as a result of higher gas prices. Over the remainder of the year, they say, they will pay $740 more in gas costs.
The economists got to this number by building a “simple model” of the pass-through of crude oil prices to retail gasoline prices, referring to Goldman Sachs’ forecast issued after the start of the Iran war.
On Sunday, the bank raised its 2026 average price forecast for Brent crude oil—the global benchmark—to $85 per barrel from its previous $77 per barrel, while it expects the price to average $110 per barrel in March and April, up from a prior $98 per barrel. This is assuming that the Strait of Hormuz remains closed for three weeks—while a continuous shutdown of the waterway would keep oil and gas prices rising for longer.
Not all American households stand to see their tax refund savings be wiped out completely. Non-drivers and electric vehicle owners face no price hike at the pump, while households with long commutes would likely take the brunt of the recent surge. Refund amounts are also different from household to household.
Like any forecast, the analysis by Stanford University researchers is not necessarily what will happen. A lot will depend on how long transit through the Strait of Hormuz remains too risky and when the war will end.
Another study released this month found that the poorest households in 9 states will actually end up paying more as a result of the Trump administration’s tax breaks passed under the OBBB.
What People Are Saying
White House spokesperson Kush Desai told Newsweek: “President Trump has always been clear about temporary disruptions as a result of Operation Epic Fury. While the U.S. Military continues making astonishing progress neutralizing the Iranian terror regime, the Trump administration remains focused here on the homefront implementing President Trump’s proven economic agenda of deregulation, tax cuts, and energy abundance.
“This agenda created historic prosperity in President Trump’s first term, and it’s again raising real wages and securing trillions in investments. After Operation Epic Fury’s objectives have been realized and the world is a safer place, America is set to achieve new highs.”
President Donald Trump posted on Truth Social on February 17: “Tax Refunds this year, because of ‘THE GREAT BIG BEAUTIFUL BILL,’ are substantially greater than ever before. In some cases, estimates are that over 20 percent will be returned to the Taxpayer.
“So, when you get your Tax Refund, think about what a wonderful President you have — NO TAX ON TIPS, NO TAX ON SOCIAL SECURITY FOR OUR GREAT SENIORS, NO TAX ON OVERTIME, INTEREST DEDUCTIONS ON CAR LOANS, AND MUCH MORE. Don’t spend all of this money in one place!”
Trump said during a press conference in the Oval Office on March 19 that he expected gas prices would be “much worse” after authorizing strikes in Iran, stating: “Everything was going great, the economy was great, oil prices were very low, and gasoline was dropping too. And I saw what was happening in Iran and I said, ‘I hate to make this excursion, but we’re going to have to do it,’ and I actually thought the numbers would be worse.
“I said, ‘You know, if I do that, oil prices will go up, and the economy will go down a little bit.’ I thought it would be worse, much worse. Actually, I thought there was a chance it could be much worse. It’s not bad, and it’s going to be over with pretty soon.”
Vice President JD Vance called the rise in gas prices a “temporary blip,” adding: “Look, gas prices are up, and we know they’re up, and we know that people are hurting because of it, and we’re doing everything that we can to ensure that they stay lower.”
What Happens Next
The Trump administration is considering “all the options on the table” to mitigate higher global oil prices, White House spokeswoman Taylor Rogers told CBS News last week. Once the U.S. achieves its objectives in Iran, oil and gas prices will come down, she said, and “as a result, American families will benefit greatly in the long term.”
For gas prices to meaningfully come down, traffic needs to resume in the Strait of Hormuz, which carries one fifth of the world’s oil, oil production must return to normal levels, and crude prices have to fall consistently.
Update, 3/26/2026 9:35 a.m. ET: This article has been updated to include a comment from a White House spokesperson.
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