What: US retailers are facing mounting pressure as the Iran conflict drives up costs and shifts consumer spending toward essentials and value-driven formats.

Why it is important: This development underscores how geopolitical instability and inflation are accelerating value-driven shopping and forcing retailers to adapt rapidly.

US retailers are contending with a new wave of consumer stress as the Iran conflict stretches into its fourth month, intensifying inflation, energy costs, and supply chain disruptions. While consumer spending remains resilient, shoppers are increasingly selective, prioritising essentials and value-driven purchases while pulling back on discretionary items. Discount retailers such as Dollar General and Dollar Tree are seeing a surge in higher-income shoppers trading down, reflecting a broader shift toward affordability and value. Membership clubs like Costco and Sam’s Club are also benefiting from this trend, drawing more traffic with cheaper fuel and everyday essentials. Meanwhile, apparel and department stores face uneven performance, with brands like Gap and American Eagle struggling, while others such as Abercrombie & Fitch and Bath & Body Works thrive by offering affordable luxuries. The sector’s outlook is clouded by uncertainty over the duration and impact of the conflict, with rising gas prices and inflation expected to further pressure discretionary spending, especially during critical periods like back-to-school and the holidays. Retailers are thus compelled to adapt quickly, focusing on operational resilience, pricing strategies, and value-driven propositions to navigate this volatile environment.

IADS Notes: In March 2026, The Robin Report and Inside Retail detailed how the Iran conflict triggered severe supply chain breakdowns and economic instability, compelling retailers to overhaul sourcing and logistics strategies. Forbes (March 2026) emphasised that geopolitical instability was intensifying inflation and energy costs, undermining consumer confidence and forcing rapid adaptation in pricing and risk management. BoF (March 2026) highlighted a pronounced shift in consumer behaviour, with middle- and lower-income households prioritising essentials and value, while higher-income shoppers continued to seek affordable luxuries. The Financial Times (December 2025) documented robust growth at dollar stores, which began attracting shoppers from all income brackets as affordability pressures mounted.

(December 2025) further confirmed that discount and off-price formats outperformed traditional categories, reflecting heightened price sensitivity and selective purchasing across the retail landscape.

US retailers brace for bigger consumer stress test as war drags on