The oil shortages in the 1970s were terrible, predominantly caused by Middle Eastern countries curtailing deliveries to the United States. It was an ugly time, with gasoline lines and high energy prices (for the time period). Chevron (NYSE: CVX) CEO Mike Wirth just described the current energy market as similar to the one in the 1970s. That could be a big problem for retailers.
Tipping the economy in the wrong direction
To be fair, the United States isn’t as reliant on Middle Eastern oil today as it was in the 1970s. So the direct impact on the U.S. market won’t be the same. However, countries like Japan, which import a lot of oil from the Middle East, could see a 1970s-style hit, including gasoline lines, if supply disruptions from the ongoing geopolitical conflict in the region continue. But the United States can’t entirely avoid the impact, since oil is a commodity. There are fears that high energy prices alone could push the United States and the world into a recession.
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That’s not unreasonable, noting that retailers like Dollar Tree (NASDAQ: DLTR) and Walmart (NASDAQ: WMT) are already benefiting from wealthier customers trading down to lower-price stores. For example, Dollar Tree’s sales rose 9% in the fiscal fourth quarter, with same-store sales increasing 5%. By comparison, Target (NYSE: TGT), which is positioned to offer a higher-quality shopping experience, just ended a year-long stretch of weak performance, marked by falling same-store sales. While first-quarter 2026 same-store sales jumped 4.4%, the comparison was relatively easy. And management highlighted that “much more work in front of us” and it highlighted the still “uncertain operating environment.”
If there’s a recession, it wouldn’t be surprising to see Target lag its retail peers. But it probably won’t be the only retailer that suffers. During economic downturns, consumers tend to pull back on large purchases and discretionary items. While Wall Street increasingly talks about a “K” shaped recovery, that may not be enough to save luxury retailers from experiencing sales weakness. Even wealthy customers who can easily withstand an economic pullback often cut back on spending during a recession.
That means that retailers like Tapestry (NYSE: TPR), which owns Coach and Kate Spade, are likely to see a sales slowdown. The Coach brand has been performing strongly, but Kate Spade has been a weak spot. A recession could make selling expensive handbags a lot more difficult. Notably, the Japanese market isn’t doing well for Tapestry, which could be a harbinger of things to come in other markets as the Middle East conflict drags on.