Wolfe Research warns that recent volatility in energy prices has the potential to shift consumer expenditures, yet it expects fiscal buffers to soften that impact. Average gasoline prices have risen to $3.54 per gallon over the past week, prompting concern about a slowdown in growth if higher fuel costs persist.
Wolfe's analysis sets out a scenario in which average gas prices are higher by about $0.50 for the entirety of 2026. Under that circumstance, roughly $70 billion of consumer spending would be rerouted from goods and services toward energy outlays. The firm quantifies that reallocation as imposing a headwind of about 0.2% on nominal gross domestic product.
Despite that potential drag, Wolfe Research notes two important mitigating factors. First, fiscal stimulus from the OBBB is expected to provide near-term relief that will reduce the direct financial burden on households. Second, tax refunds have escalated, running 11% higher year-to-date, which Wolfe says will support consumer spending.
The research group highlights additional demand-side supports beyond refunds and fiscal transfers. It points to wealth effects and demographic dynamics linked to the baby boomer cohort as supplementary forces underpinning consumption.
On market behavior, Wolfe expects equities to remain reactive to headlines in the immediate term. Still, both the firm and most investors are working from the expectation that the current conflict will substantially de-escalate within weeks. Should that de-escalation occur, Wolfe anticipates gasoline prices would decline, alleviating some of the described pressure on consumer budgets.
Overall, Wolfe frames the situation as one in which an energy-driven squeeze on spending is plausible but likely to be at least partly offset by policy support and elevated tax refunds. The firm's view balances a measurable economic sensitivity to sustained higher fuel costs against tangible buffers in household cash flows.