Six months into the Iran war, rising oil and gas prices are driving up inflation. Diesel on Friday topped $6 a gallon for the first time on record, and gasoline prices remain near the highest levels since 2022.

At the same time, beyond the gas pump and airline terminal, there are few signs these soaring fuel costs are filtering into the broader economy, raising prices for products such as food and clothing.

Cars and planes

For most Americans, oil-fueled inflation shows up most quickly in their gas tanks. Gasoline prices took off quickly after the U.S. and Israel attacked Iran at the end of February, reached a national average of about $4.30 Friday and are up 44% since the war began, according to AAA.

Meanwhile, airfares were up 23.4% in August from a year earlier. Federal data show Americans are increasingly willing to spend big on trips, making it easier for airlines to pass higher jet fuel costs on to travelers. And that may not change soon as high stock prices continue to fatten travel budgets.

"The boomers who are traveling and eating out won't cut demand just because the fed funds rate rose by 25 basis points," LPL Financial chief economist Jeffrey Roach wrote in a note Friday.

Diesel surge

The big question is whether fuel prices will eventually start increasing prices for other goods and services.

While diesel cars are rare, the fuel is vital behind the scenes and especially expensive. Diesel prices are up more than 60% since late February, outpacing regular gasoline, and recently hit the highest level on record.

The fuel powers farmers' tractors and combines, and the rising price has made it more expensive to transport produce to supermarkets. Perishable goods such as seafood and dairy are particularly vulnerable because refrigerated transport is more fuel-intensive, said David Ortega, an economist at Michigan State University.

The good news for inflation-weary consumers is that the toll has been limited thus far. Core prices excluding food and energy were up 2.4% in August from a year ago, matching analysts' expectations and slightly cooler than July's yearly increase, the Labor Department reported Friday.

Food prices are a bit higher, up 2.7% in the year ending in August, but economists say they aren't seeing signs energy prices are having much impact on food.

Small but growing impact

The effect of higher energy prices had a very small impact on core inflation in the second quarter, said Grace Zwemmer of Oxford Economics. She estimates the impact will grow in the third quarter, but remain muted. While core inflation excludes the direct cost of energy, oil and gas prices still influence it.

Businesses are often reluctant to pass on higher energy bills to their customers, according to economist Sung Won Sohn. Many firms hedge against rising fuel prices, and oil prices cooled over the summer before their most recent spike. Crude oil hovered around $100 a barrel on Friday afternoon, up about 45% from early July.

If businesses no longer think that their fuel bills will come back down soon, they become more likely to raise prices. Consumers expecting prolonged inflation often rush into purchases, which puts even more upward pressure on prices.

"Energy inflation does not stay at the gas station," Sohn wrote in a note to clients Friday. "It travels by truck, airplane and cargo ship into nearly every store in America."