BUSINESS

From soaring prices at gasoline pumps to high interest rates on the credit cards used to pay for that purchase, your wallet is facing a potentially bruising economic impact in the very near future.The escalating conflict in the Middle Eastrisks hiking oil prices and energy costs just as the Federal Reserve is weighing interest-rate cuts amid a gradually cooling labor market and sticky inflation, especially in services sectors such as health care and shelter.Supply disruptions especially involving oil-transit routes raise the geopolitical concerns of global traders and U.S. central bankers.If oil spikes while core inflationremains stubborn, interest-rate cuts become harder to justify. Plus, if oil surges and inflation expectations tick up, markets may need to reprice easing bets for 2026.The potential inflationary impact had traders pricing 0.56% of Fed rate cuts this year on March 2, down from 0.6% on Feb. 27 — before the U.S.-Israeli attack on Iran, Bloomberg reported.“It’s probably an early sign that the market thinks the Fed will be less inclined to cut rates if this oil price surge is sustained and ultimately translates into higher U.S. inflationary pressure,” said Gareth Berry, a strategist at Macquarie Group in Singapore. 

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Potential inflation risks from Mideast conflictThere won’t be a major inflationary hit as long as the Mideast conflict is not prolonged, JPMorgan Chase CEO Jamie Dimontold CNBC March 2.The United States is more protected from energy shocks than many of its allies due to domestic oil and gas production. However, the global impact on trade, prices, and investment could crimp what has been a bullish growth outlook for 2026.For every $10 a barrel increase in the cost of oil, the price at the pump could rise by up to 30 cents a gallon, Amy Myers Jaffe, director of the Energy, Climate Justice and Sustainability Lab at New York University, told The New York Times March 2.How oil spikes impact inflation While the CME Group FedWatch tool expects the Fed to cut the Federal Funds Rate by a quarter point at its July and September meetings, oil spikes can seep into:Headline Consumer Price Index data immediatelyCore inflation indirectly, via freight, airlines, and goodsConsumer inflation expectations, which are the Fed’s preferred measure of price stabilityThis uncertainty comes as many Americans are already grappling with rising utility bills and higher prices at grocery stores and car dealerships, prompting affordability to become a buzzword for Democrats seeking victory in the November midterm elections.Fed reacted to Ukraine invasion, energy risk“A military war, layered on top of the ongoing U.S. ‘war on trade,’ could reignite concerns over global stability,’’ Joseph Lupton, an economist at JPMorgan, wrote in a note, Reuters reported.Note: Russia’s invasion of Ukraine in 2022 posed similar global oil risks. The Fed, in a dovish reaction, reduced its plans for a major interest-rate hike in the spring of 2022.The result: A sharp rise in inflation, and the Fed quickly responded with rate hikes.”The conflict with Iran is a wild card, though markets may quickly lose ‌interest if the ⁠situation looks likely to devolve from a regional to an internal conflict,” Tim Duy, chief U.S. economist at SGH Macro Advisors, wrote March 2.How the Fed manages interest rates The Fed’s dual congressional mandate requires it to balance full employment and price stability.Lower interest rates support hiring but can fuel inflation.Higher rates cool prices but can weaken the job market.The two goals often conflict, operate on different timelines and are influenced by unpredictable global events. After the December rate cut, Fed Chair Jerome Powell said that the lowering of rates brought monetary policy “within a broad range of neutral.”A neutral rate neither stimulates nor restrains economic growth.When the Federal Reserve last paused interest ratesThe Fed last paused interest rates in September 2023, holding the funds rate at 5.25% to 5.50% after a rapid tightening cycle aimed at curbing post-pandemic inflation.The pause lasted nearly a year as policymakers wanted to see if the higher borrowing costs would tame inflation without dipping the economy into a recession.Related: Crude, natural gas prices jump on Iranian newsDuring that pause, inflation gradually cooled and the labor market remained resilient.The central bank resumed cutting rates in September 2025, once Fed officials became confident that inflation was moving sustainably toward the Fed’s 2% target.Inflation risk adds to Warsh’s list of challengesPresident Donald Trump has been demanding the Fed dramatically slash interest-rates to 1% or less to jump-start the stagnant housing market and reduce the interest on the national debt.The president’s campaign for lower rates included vows that his nominee to replace Powell’s term as chair in May would support rate cuts, prompting concerns about Fed independence from political influence.Former Fed Governor Kevin Warsh, Trump’s pick to replace Powell, is facing a tough Senate confirmation in part due to Republican Sen. Thom Tillis of North Carolina vowing to hold up the process until the administration drops a criminal probe of Powell. More Federal Reserve:Fed Chair Powell sends frustrating message on future interest-rate cutsPowell has called the unprecedented investigation into the $2.5 million restoration of Fed headquarters a “pretext” to force lower interest rates.With the clock ticking, the Senate has yet to schedule Warsh’s nomination hearings.”It does strike me as odd that there’s been no forward movement on the Warsh nomination,” Derek Tang, an analyst with forecasting firm LH Meyer, told Reuters on Feb. 27. “The White House seems no closer to overcoming the Tillis block: that the senator won’t let any nominee for the Fed get past the Senate Banking Committee unless and until the Powell probe goes away.”Fed officials debate inflation riskMultiple Fed officials, including Federal Reserve Bank of Boston President Susan Collins and Richmond Fed President Thomas Barkin, have already warned that inflation remains too uncomfortably high to consider cutting rates in the short term, including the March 17-18 meeting of the policymaking FOMC. By contrast, Miran has called for four quarter-point cuts this year, saying the Fed should still cut a full percentage point from its policy rate in 2026 because there were still risks to the labor market while inflation was no longer a problem.President Trump has said he had not asked Warsh to lower rates, but felt it was clear what his nominee would do.Warsh, a vocal proponent of Fed reform, has argued that AI-driven improvements in productivity would justify lower interest rates.The Fed chair is only one vote of 12 on the policy-making FOMC. The role is traditionally seen as one in which the chair would drive the other 11 Fed officials to agree with their point of view based on economic data.Economists have said that Warsh could face resistance from the other FOMC members to cut rates pending economic activity and world events.Evercore ISI Vice Chairman Krishna Guha told Bloomberg that investors may be overestimating Warsh’s hawkish reputation.While Warsh, 55, was among the more inflation-focused officials during his previous stint at the Federal Reserve, Guha says he’s better understood now as a pragmatic conservative (with a small “c”) who distinguishes between supply-driven and demand-driven inflation —  framework that could make him more dovish in today’s environment.Related: Fed officials signal shocking twist on interest-rate cuts

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Costco and Sam’s Club often operate across the street from each other. When they don’t, most consumers pick the location closest to them, because for many Americans, joining a warehouse club means driving longer distances than shopping at traditional grocery chains.”Research shows that the average travel distance to a warehouse club can be more than 15 miles, compared to less than 5 miles for traditional grocery stores,” according to an academic study by Concordia University graduate student Hala Essabik. As a consumer, I mildly prefer Costco’s product selection and food court over Sam’s Club’s, but I would not drive more than a few extra minutes if the Walmart-owned brand was closet to my house. Sam’s Club actually outscored Costco on the recent American Customer Satisfaction Index (ACSI) report, 85 to 82, but both of those scores are above any other retailers except for Macy’s and the TJX Brands, which both scored an 82.It’s fair to say that Costco and Sam’s Club offer fairly similar value propositions to members, so any changes might tip a customer from one chain to the other. Costco has made a recent change to its credit card offering, which could save members an additional $1,000 per year over Sam’s Club members.Related: History of Costco: Company timeline and factsCostco makes a key credit card changeCostco has increased its cash back on gas from its own gas stations from 4% to 5% for people who pay with the Costco Anywhere credit card from Citi. The warehouse chain’s gas stations only take credit and debit cards. You cannot pay with cash.Costco CFO Gary Millerchip sees the change as a way to make membership more valuable.“And then we’re committed to continuing to improve the value of the membership. We’ve made some major changes recently with the extended opening hours, the Instacart benefits, and 5% gas on the credit card, but we’ll continue to look for ways to add greater membership value,” he said during Costco’s first-quarter earnings call.Costco caps its annual cash back at $7,000 than drops to 1% on any further fuel or EV charging spending.More Costco from Daniel Kline:Costco has big plans members need to knowCostco adds more big brands and lowers pricesCostco makes key shopping changes in-store and onlineSam’s Club’s card only offers 5% cash back on gas up to $6,000, according to Synchrony Bank’s web page for the card.The Costco card, however, only gives 4% cash back on gas purchases at non-Costco gas stations, while the Sam’s Club card offers the 5% anywhere you fill up.Still, someone using the Costco Citi Anywhere card has the potential to earn an extra $1,000 per year. Members I have spoken with have told me that they plan to max out the benefit, and it’s enough of a perk that I may consider the Costco Citi Anywhere when we move close enough to a Costco to make that practical.The challenge, and remember that this is per household, you need to spend over $500 on gas each month to reach the Sam’s Club $6,000 threshold and more than that to benefit from the higher cap at Costco.

Costco and Sam’s Club both offer gas stations at some of their warehouse club locations. Shutterstock

Costco doubles down on gasIn addition to the credit card change, Costco has made another major change at its gas stations.”We also extended our gas station hours in North America during the quarter to make filling up at Costco more convenient for our members. Generally, our stations are now staying open an hour later than they did previously, with some opening earlier as well,” CEO Ron Vachris shared during the chain’s second-quarter earnings call.Costco’s Citi Visa gas cashback offer factors into The Points Guy suggesting that the credit card is a good one for families, but it did point out one small issue.“It’s worth pointing out that you’ll earn just 1% back (not 5% or 4%, respectively) on gas and EV charging purchases from superstores, supermarkets, convenience stores and warehouse clubs other than Costco or on fuel purchases that aren’t for automobiles (such as jet or boat fuel),” the site wrote in its review of the Costco Anywhere Visa by Citi.Costco and Sam’s Club generally offer gas at some of, if not the lowest prices, in any given market. “Spring weather may be weeks away in much of the country, but the seasonal rise in gas prices is underway. The national average for a gallon of regular gasoline went up by more than 5 cents this past week to $2.98,” according to data from AAA. Refineries are beginning the process of producing summer-blend gasoline, which contains pricier additives to help reduce evaporation during warmer months. Gas demand is also expected to increase next month as spring break season kicks off and more drivers take road trips, AAA shared. Related: McDonald’s gives Americans more of what they want