Gen Z's spending glow-up is running into a $4 gas problem

• Gen Z and millennials saw a spending resurgence in the second half of 2025.
• But the higher gas prices caused by the Iran war are threatening to slow that progress.
• How the labor market evolves will be a deciding factor.

It seems like Gen Z and millennials can't catch a break these days.

For those looking to buy their first house, the market has been tough for years, essentially gridlocked by high prices, high mortgage rates, and low inventory. The job market is also in a "Great Freeze": the unemployed can't find jobs, and those with them can't grow.

But there has been one economic bright spot recently for the Gen Z and millennial cohorts: how much money they've been pumping into the economy.

New data from Bank of America shows that their spending growth in the second half of 2025 surpassed older generations like baby boomers for the first time in years. The reason why is encouraging: rent growth is cooling at a time when wage growth is heating up. Good vibes, right?

Well, I hate to be the bearer of bad news, but the Iran war could put an end to this still-nascent period of economic strength.

As with most bearish scenarios involving the war, the flashpoint is oil-market disruption. In this case, the focus is on gas prices at the pump, which are pushing $4 a gallon nationally.

Gen Z is the most exposed, BofA finds. It's the only generation to not see gasoline spending as a share of overall consumption fall from pre-pandemic levels. Millennials, meanwhile, have seen a smaller decline than Gen X or boomers.

BofA notes that Gen Z is in a situation where it's commuting for the first time, and income is still relatively low. Millennials may make more money, but they're raising families and doing the most driving.

To put it in fully zoomed-out terms, the Iran war is threatening to cut off a spending resurgence for younger generations.

Another key variable going forward is the labor market, which BofA describes as being in a stable "low-hire, low-fire" mode.

The firm is eyeing any prolonged impact from the Iran war on sectors like retail and leisure, which tend to employ more younger people. The industry has already taken a hit in the stock market. Further disruption could put more pressure on already-fraught spending conditions for Gen Z and millennials.