Walmart has warned that higher petrol prices are causing US consumers to cut spending elsewhere as the war with Iran continues to squeeze household budgets.

The retail giant expects its sales growth between May and July to slow significantly compared with the previous three months, with higher pump prices to blame.

The conflict in the Middle East has led to a surge in wholesale oil prices, in turn pushing up petrol prices for Americans.

Data from motoring group AAA shows the average price of a gallon of petrol has hit $4.56 (£3.40), up from $3 when the war began.

In an interview with CNBC, Walmart finance boss John David Rainey said the rising cost of living had so far been offset by higher tax returns resulting from tax cuts in President Donald Trump's One Big Beautiful Bill Act (OBBBA).

But he warned that shoppers would be under increasing strain as that effect wears off in the current financial quarter.

"I think higher tax returns muted some of the pressure related to higher fuel prices, and as we're in a period of time right now where those tax refunds are largely not coming in, I think consumers are going to feel more of that pressure from higher fuel prices," he said.

The retailer was "keeping a close eye" on petrol prices but expects them to remain high for the coming months, Rainey said.

Walmart is the largest private employer in the US and one of its largest retailers, so its earnings offer insight into how American consumers are affected by the fallout from the war in Iran.

On a call with investors, Rainey also warned that if the closure of the Strait of Hormuz continues, it could force the retailer to hike food prices due to shortages of fertiliser, nitrogen and phosphates.

Walmart's first-quarter profit, from February to April, was $5.3bn, up 18.8% compared with a year earlier.

Sales in the quarter rose by 7.3% on the year to $177.8bn, the retailer said.

But it warned this rate of growth would slow to between 4% and 5% between May and July as the rising cost of living begins to bite.

The company's shares fell by 7% on Thursday morning in response to the worse-than-expected guidance.

AJ Bell's head of financial analysis, Danni Hewson, said Walmart's warning highlighted the impact of the fuel shock on consumer spending power in the US.

"But a consumer facing their own rising fuel costs will continue to seek out the kind of value that Walmart has become synonymous with after a series of price cuts beginning last year," she added.