Costco's Gas Pumps Are Shattering Records — And the Iran War Is Why
There is a particular kind of American ritual playing out in parking lots from Issaquah to Indianapolis right now: a line of cars, sometimes dozens deep, idling in front of the distinctive canopy of a Costco gas station. It is not a new sight. But the scale of it — the sheer volume of fuel flowing through those pumps — has never been witnessed before in the company's nearly five-decade history. In the middle of a geopolitical crisis that has sent energy prices to levels not seen since Russia's 2022 invasion of Ukraine, Costco has become an unlikely protagonist in one of the most consequential stories about American consumer behavior, global oil markets, and the economics of value retail in years.
When Costco CEO Ron Vachris stepped up to the podium on the company's Q3 2026 earnings call in late May, he had a remarkable set of numbers to deliver. The result, he told analysts, was "record-breaking volumes" — all three four-week fiscal periods of the quarter set successive all-time company volume sales records, with the final five weeks of the quarter becoming the company's top five volume weeks ever. In the language of corporate earnings calls, where superlatives are rationed carefully, that kind of statement is extraordinary. In the context of what is happening at gas pumps across the United States right now, it makes complete sense.
The Spark: A Strike on Iran and a Chokepoint That Changed Everything
To understand why Costco is selling fuel at a pace that has no historical precedent in its own records, you have to understand what happened in the Persian Gulf beginning on February 28, 2026. The United States and Israel attacked Iran on that date, and Tehran responded by shutting off access to the Gulf of Hormuz, through which a fifth of the world's oil and liquefied natural gas passes. That single act of retaliation triggered a chain reaction in global energy markets that has not yet fully played out.
The Strait of Hormuz, the narrow passage of the Persian Gulf through which a fifth of the world's crude oil normally passes, was effectively shut, and oil tankers were stranded there, unable to deliver crude. The consequences were immediate and severe. The effective closure of the Strait of Hormuz triggered the largest supply disruption in the history of oil markets, according to the International Energy Agency, pushing oil prices as high as $112 a barrel in early April.
In just the first week after President Donald Trump bombed Iran, the average price of gasoline in the United States increased 48 cents per gallon. That was only the beginning. The average U.S. price for regular grade gasoline reached $4.50 per gallon as of the week ending May 11, up $1.56, or 53%, from the average price of $2.94 during the week ending in late February.
The geography of pain has not been distributed evenly. Nationwide, gas prices are up 33 percent from a year ago, currently averaging $4.16 a gallon, while gas prices in some parts of the West Coast, including the Seattle area, can exceed $6 a gallon. In five states — Alaska, Hawaii, Nevada, Oregon, and Washington — average gas prices are more than $5 per gallon, and in California prices are near $6, the highest in the nation.
The Costco Proposition: Cheap Gas as a Loss Leader With a Long History
Costco has always understood that its gas stations are not really in the fuel business — they are in the membership business. The company built its retail model on the same philosophy behind its $4.99 rotisserie chicken and its $1.50 hot dog combo: price something the average American needs at a deliberately thin margin, and he will keep coming back, membership card in hand. Gas has long been one of the most powerful expressions of that strategy, especially when the spread between Costco's pump price and everyone else's becomes glaringly visible.
The Issaquah-based warehouse club typically offers gas prices up to $0.30 cheaper per gallon than other gas stations. Costco makes little profit on gas as a result — but, like its $4.99 rotisserie chicken or $1.50 hot dog combo, the low prices attract customers willing to purchase a Costco membership to access such discounts. When the national average sits comfortably below $3, that thirty-cent discount registers as a pleasant perk. When prices spike above $4 and creep toward $5, it becomes a financial lifeline — and millions of Americans suddenly take notice in a way they hadn't before.
Costco entices customers to its store and gas pumps with lower prices for its members. The war has turned that enticement into a genuine draw for people who had never once considered a Costco membership for its fuel benefits. The high consumer price sensitivity, which fueled record volumes, also drove many members to use Costco gas stations for the very first time in the third quarter. That is new territory for the company — and potentially very valuable territory.
Unprecedented Demand: What It Actually Looks Like on the Ground
The practical logistics of serving customers at this scale are not trivial. Running a gas station is a relatively straightforward operation under normal conditions — monitor inventory, schedule deliveries, manage the queue. What Costco's gas team has been managing over the past several months is something categorically different.
Vachris said his gas team "performed exceptionally well to manage this unprecedented demand, which requires multiple daily gas deliveries to many locations." The fuel supply chain — tanker trucks, terminal scheduling, delivery routing — had to be fundamentally recalibrated at many high-traffic locations. The demand was so strong that some high-traffic Costco locations needed multiple daily gas deliveries. For context, most gas stations receive deliveries every few days. Running multiple deliveries per day at a single location speaks to the extraordinary pressure being placed on the system.
The numbers behind the quarter are equally striking. Higher fuel prices boosted Costco's overall sales by around 2.2 percent, according to CFO Gary Millerchip, and in the third quarter, Costco's revenue was also up 11.6 percent to $70.5 billion, with net income rising 15 percent to $2.2 billion. Same-store sales grew 9.8%, with 9.4% growth in the U.S., 10.7% in Canada, and 11.2% in other international markets — all higher than Wall Street had predicted.
CFO Gary Millerchip added that Costco's volumes of gas sales allowed the company to widen its price gap with higher-cost stations, adding that the company knows "that's something that's very high on our members' minds." In other words, as the price at the BP or Shell down the street climbs, Costco's discount in absolute dollar terms actually grows, making the value proposition even more compelling.
The Flywheel Effect: Gas Customers Become Store Customers
What makes the gas station boom so strategically important for Costco is what happens after the tank is full. The relationship between fuel customers and warehouse shoppers is not incidental — it is structural, and Costco's leadership clearly understands it as one of the most powerful acquisition channels in their business.
Motorists flock to Costco when prices are high because the company sells gas at a discount. After filling up, they're more apt to duck their heads into the warehouse locations to do a little unplanned shopping. Every first-time gas customer who walks through those warehouse doors represents a potential long-term member and repeat buyer across every category the company sells — groceries, electronics, clothing, tires, optical services, and more.
Vachris noted that "the high consumer price sensitivity, which fueled these record volumes, also drove many members to use our gas stations for the very first time in the third quarter," adding, "We believe this will drive even greater loyalty with these members in the future as members who use our gas stations typically spend more with us in the warehouse." It is a classic example of a crisis creating a customer acquisition opportunity that no marketing campaign could replicate.
The broader membership picture reflects this dynamic. Costco also saw paid memberships grow 4.1% for the quarter and had a 37% increase in website and app traffic. That surge in digital engagement suggests that even consumers who are not yet members are researching whether a Costco membership is worth it — and right now, with gas prices where they are, the math is not difficult to do.
The Cost to American Households: A $450 Hit and Counting
While Costco's record-breaking volumes tell a story of corporate opportunity, the broader context is one of acute financial stress for ordinary Americans. Americans have spent nearly $450 extra per household on rising energy costs during the Iran war, according to an analysis shared exclusively with CNBC. The average household has shelled out $447.19 for additional fuel-related expenses since the conflict began on Feb. 28, per data from Moody's Analytics.
That's cumulatively cost American consumers nearly $60 billion as gas prices and airline fares have surged. The pain is not confined to the pump. Pricier diesel, which is used in vehicles like delivery trucks and boats, has resulted in more than $20 billion in additional expenses for consumers, and the price of diesel has similarly jumped roughly 47% since the beginning of March to around $5.52 a gallon.
The burden falls hardest on the working class, long-distance commuters, delivery drivers, and rural households for whom driving is not optional. These are precisely the Americans who cannot simply elect to drive less or work from home, and they are the ones absorbing the most punishment from a conflict being fought thousands of miles away.
Mark Zandi, Moody's chief economist, warned that "unless the war ends soon, financially pressed consumers will have no option but to turn more cautious in their spending, threatening the already soft economy." If prices stay at current levels, the average household could take a hit of almost $2,000 at the one-year mark of the war, Zandi said. That number has a way of focusing the mind.
The Inflation Cascade: Beyond the Pump
The reach of war-driven energy prices extends well beyond what drivers see on the marquee at the corner station. Fuel is a foundational input cost for almost every industry in the American economy, and when its price surges this dramatically, the ripple effects are wide and deep.
U.S. consumer prices climbed sharply as the war with Iran delivered higher gasoline prices and more pain for Americans, with the Labor Department's consumer price index rising 3.8% from April 2025 — the biggest jump in three years. That acceleration in inflation has put the Federal Reserve in an impossible position.
The Fed, which had been expected to cut its benchmark interest rate in 2026, has turned cautious as it waits to see how long the conflict lasts and whether higher energy prices spill over into other products and cause a broader inflationary outbreak. Rate cuts that American homeowners and small businesses were counting on have been indefinitely delayed — collateral damage from the Strait of Hormuz closure that few had planned for.
In the United States, despite record levels of domestic fuel production, prices are more exposed than ever to global fuel interruptions after a decade of building infrastructure meant to link domestic supply to overseas markets. Many parts of the U.S. economy are still dependent on fossil fuels, and higher prices for oil and gas increase the prices for gasoline, electricity, fertilizer, food, and more. The notion that American energy independence insulates domestic consumers from Middle Eastern shocks has been proven, again, to be more myth than reality.
Will Prices Come Down? What the Experts Are Actually Saying
President Trump has been consistent in his message: the moment the war ends, prices will fall rapidly. The experts are considerably less certain. Energy experts say that prices will start to fall when the conflict is resolved, but it could take many months before the national average is back to where it was before the conflict began — with Patrick De Haan, head of petroleum analysis at GasBuddy, saying it could take beyond a year for pre-war prices to return.
The structural reasons for that caution are significant. The longer the flow of oil is constrained through the Strait of Hormuz, the higher prices will go and the longer it will take to get back to normal. Even if there were a true and lasting resolution of the conflict, both sides committed to keeping Hormuz open, it would still take months to get back to what it was pre-war, if not even longer.
Commodities analysts at Citigroup warned that the price of international Brent could rise as high as $150 per barrel "if the Strait remains closed through the end of June." That scenario would push American pump prices into territory that has never been seen on a sustained national basis. While a fragile ceasefire is in place, the strait remains effectively closed — meaning that the resolution of the formal conflict has not yet translated into a resumption of normal oil flows.
Tom Kloza, chief energy adviser for Gulf Oil, predicted that prices in many states could be "back in the $3-$3.50/gal neighborhood" in the final 100 days of the calendar year, when gasoline prices "almost always drop" because "demand slumps and the formula for motor fuel changes" — though he cautioned that projection could change if the blockade on the Strait of Hormuz continues or if a strong hurricane hits the Gulf of Mexico.
Costco's Strategic Positioning: A Value Retail Play for Hard Times
There is something fitting about the fact that the retailer currently setting 50-year gas sales records is also the retailer that sells a warehouse-sized vat of mayonnaise next to a cashmere sweater. Costco's entire model is an exercise in leveraging scale to deliver value, and in a moment when American consumers are being squeezed simultaneously by gas prices, food inflation, and credit card debt, that model is more relevant than it has been in years.
Vachris said Costco's tactic of offering "quality goods and services at the lowest possible price" is resonating with consumers, explaining that higher inflation due to gas prices was offset by lower inflation in food and sundries, driven by deflation in produce, eggs, and dairy. In a moment of broad inflation anxiety, the ability to offer any product category at a lower price is a meaningful competitive advantage.
On the earnings call, Costco executives also announced that the company had cut prices on several Kirkland Signature products, in part in response to rising gas prices. The message to members is clear: we know you are paying more to get here, and we are going to make it worth your while when you do.
For investors, the picture is more complicated. Costco stock fell more than the broader market as investors turned wary of its high valuation, sensing drawn-out impacts from the Iran war and perhaps no rate-cut relief. Despite the blowout results, the overall gross margin dropped 21 basis points as Costco lowered prices on some key items and faced higher transportation costs, leading to concerns that too much of the gains came from the temporary spike in gas prices. If and when the Strait of Hormuz reopens and pump prices normalize, some portion of that record gas-driven revenue will evaporate — and Wall Street is pricing that risk in now.
Historical Parallels: Oil Shocks and the Retailers Who Benefited
The current moment has obvious historical echoes. The 1973 Arab oil embargo, the 1979 Iranian Revolution, the 1990 Gulf War, the post-Katrina price spike of 2005, and the 2022 surge following Russia's invasion of Ukraine all delivered sharp and sudden increases in American pump prices. Each of those events reshuffled consumer habits, accelerated certain business models, and punished others.
What is different now is the institutional infrastructure that Costco represents. Costco has 747 gas stations, which brought in 10 percent of its overall sales in 2025. No previous oil shock played out against the backdrop of a single retailer controlling that many discount pumps, all bound together by a membership model that creates a captive audience with real financial skin in the game. When the 1979 shock hit, there was no national warehouse membership chain positioned to vacuum up price-sensitive drivers at scale. That structural difference makes this episode genuinely novel.
During the June 2025 12-Day War in Iran, crude oil prices rose about 10 percent in the days before and during the conflict but returned to roughly their previous levels as the conflict ended. The current war, by contrast, has produced price increases of more than 50 percent — and the disruption has persisted for months rather than days. The magnitude and duration of this shock put it in a category of its own in the post-Cold War era of global energy markets.
What Comes Next: Loyalty Built at the Pump
The most durable consequence of this moment for Costco may have nothing to do with quarterly revenue at all. It may be the membership loyalty being forged right now in parking lots full of idling cars. Every driver who fills up at a Costco pump for the first time this year, every person who runs the mental math and decides a $65 annual membership is justified by the savings at the gas station alone, is a potential long-term customer across every category in the warehouse.
Traffic growth decelerated sequentially, but comparable ticket size growth accelerated as consumers continued to seek out the best-in-class value Costco can provide, thanks to its membership, bulk-selling warehouse model, and record demand at the gas pumps. The instinct to consolidate spending at the retailer offering the most demonstrable value is a pattern that, once established, tends to persist even after the emergency that prompted it has passed.
The worldwide membership renewal rate held steady at 89.7%, and the U.S. and Canada region renewal rate moved back to 92.2%. Renewal rates are the most honest measure of whether the membership model is delivering real value — and right now, amid one of the most punishing energy cost environments in recent American history, those numbers are holding firm.
The Iran war, for all its geopolitical complexity and human cost, has delivered Costco a gift it could not have engineered on its own: a nationwide demonstration of exactly why a membership is worth having. The challenge for the company, and for the tens of millions of Americans filling up those tanks, is that the gift came wrapped in a crisis that shows no clean end in sight.
