Wells Fargo: Energy Shock Could Put Pressure on Retail Demand

Wells Fargo states that supply disruptions and geopolitical tensions driving oil prices higher are very likely to weaken consumer demand, adding pressure to an already tight consumption environment in 2026.

Last week, the International Energy Agency said that with major oil-producing countries like Saudi Arabia, Iraq, and the UAE cutting production, the Middle East conflict is causing the largest oil supply disruptions in history.

“Our analysis shows that after a shock to oil prices, sales and consumption expenditures in the discretionary category are quantifiably negatively impacted by about 200 to 300 basis points, with the greatest effect on lower-end consumers, and the longer this impact lasts, the more severe it becomes,” said Wells Fargo analyst Borujo, citing historical patterns.

According to Wells Fargo estimates, a 10% increase in gasoline prices typically results in an average annual impact of $265 per household, with a 85 basis point effect on disposable income, and a heavier burden on low-income families.

The brokerage also noted that retail sales forecasts are likely to be revised downward in the near term and warned that rising fuel prices often lead analysts to cut revenue expectations, with companies serving lower-income shoppers feeling the most pressure.