Iran War Undercuts Trump's Economic Boasts

Rising oil and gas prices triggered by the U.S. conflict with Iran are undercutting President Donald Trump's long‑running claims of a booming American economy.

The energy shock is hitting just as inflation remains stubborn and the Federal Reserve weighs whether higher costs have closed the door on interest‑rate cuts this year.

Households and businesses are already feeling the impact through higher fuel prices and growing uncertainty, with economists warning the economic fallout could linger well beyond the war itself.

Prior to the war beginning on February 28, the health of the U.S. economy-though questioned by many experts-had been a point of pride for the administration.

The story from the White House podium was that markets, business and consumers were, under Trump’s watch, thriving-a fact that justified the president awarding himself an “A+++++” grade on this key issue.

Trump's ‘Booming Economy' Case Before the War

Only days before the U.S.-Israeli strikes on Tehran which kicked off the conflict, Trump used his State of the Union address to celebrate America's “stunning” revival to an economy “roaring like never before,” and to insist that the affordability crisis-one either manufactured by his opponents or caused by his predecessor-was over.

While the president has continued to strike a similar tone in recent weeks, U.S. officials and energy analysts say the conflict has introduced a significant new source of economic risk.

Why Oil and Gas Prices Have Risen Sharply

Iran's disruption of traffic through the Strait of Hormuz-a critical chokepoint for roughly a quarter of global oil shipments before the war-has rattled markets and driven a rapid rise in energy prices.

Global oil prices have climbed to a four‑year high, with U.S. gas prices rising in tandem, creating a shock that economists say now rivals the surge triggered by Russia's invasion of Ukraine in 2022.

Those developments have forced policymakers to reassess the economic outlook, with the spike in energy costs feeding directly into inflation at a moment when price pressures had already proved difficult to tame.

Federal Reserve Faces New Inflation Risks

These issues were top of mind for Federal Reserve officials going into their latest policy meeting, at which they left interest rates unchanged while citing a “high level of uncertainty about the economic outlook” caused by the war.

In a press conference following the announcement, Jerome Powell said that the economy had “been expanding at a solid pace.” However, the outgoing Fed Chair similarly warned that the conflict-induced surge in oil prices was feeding into consumer costs and broader inflation, apparently impacting officials’ calculus as they weighed up whether to cut rates as Trump has long demanded.

“Fed rate cuts were on the cards,” economist Justin Wolfers posted to X on Wednesday. “But then the U.S. invaded Iran. Now the outlook is very different.”

Going into 2026, experts had anticipated a handful of rate cuts as the central bank balanced its dual mandate of taming inflation while ensuring maximum employment, and the smart money had previously considered easing a possibility at this week's meeting.

Why Rate‑Cut Expectations Have Shifted

According to the CME FedWatch tool, which translates prices from 30-Day Fed Funds futures contracts into rate-cut odds, the chances of the central bank holding rates steady in April were rising toward the end of 2025, but became a near certainty as the war pushed inflation to its fastest pace in either of Trump's terms.

And these effects are not expected to abate, according to research from the Dallas Fed, which earlier this month projected that the blockade of the Hormuz Strait-which the U.S. has now joined-could push headline inflation up materially through 2026 and into next year.

The Economy Was Already Showing Strain

Analysts and policymakers considered the economy far from robust going into the war-Powell voicing many of the same concerns regarding elevated inflation and sluggish hiring during his press conference in January.

GDP growth slowed to 0.5 percent in the fourth quarter of 2025 and the economy unexpectedly shed 133,000 jobs in February, as investors and experts continued to issue warnings about market risks including signs of an AI “bubble.”

“Broadly, the economy was in a precarious place even before the war began as job growth has come to a standstill, and while unemployment is still low, it is creeping steadily higher,” said Mark Zandi, chief economist at Moody's Analytics.

The consensus now forming, however, is that the conflict has shifted conditions from robust to precarious-or from bad to worse-undercutting Trump’s assertions of unrivalled economic strength.

“All of it has come down,” Trump said of gas prices during a speech at a northwest Georgia steel plant in February.

“We inherited a mess with high prices and high inflation, and we’ve turned it around and we made it great.”

But consumers, Zandi told Newsweek, are now “taking it on the chin as they pay higher gasoline and other prices stemming from the war's impact.”

Nationwide average gas prices have climbed to over $4 from around $3 before the conflict. Researchers at Brown University's Watson School of International and Public Affairs estimate that consumers have paid nearly $30 billion in additional fuel costs since the war began, equating to over $200 per household.

And economists warn that the fallout could linger long after the war's conclusion, as oil flows normalize, the region begins to repair the extensive damage to its energy infrastructure and supply chains recover from months of disruption.

“The tail on the closure of the Strait of Hormuz is long and will linger for months to quarters, which along with uncertainty will weigh on growth more in the second half,” said Diane Swonk, chief economist at KPMG U.S.

Swonk added that many of the “most important” price impacts, such as food costs, could “reverberate into 2027.”

“Even if the war ended tomorrow, there would remain a risk premium in oil prices given the concern that the Iranian regime can close down the Strait of Hormuz and impair global oil production at will,” said Zandi.

Despite the contemporary economic effects, Trump has continued to tout the strength of his economy.

“We had the best economy in the history of our country [in] my first term, and we're blowing it out now, we're blowing it away now,” the president said during a mid-April event in Las Vegas. “Despite our little diversion.”

Political Risks as Voters Feel the Cost

But surveys show that Americans are concerned about the war in general and gas prices in particular, with even a majority of Republicans now saying Trump is at fault for the recent spike, according to a recent Reuters/Ipsos poll.

If higher prices and slower growth persist, the war's aftershocks may land not only in Americans' wallets, but at the ballot box-eroding the party's prospects in this year's midterms.

2026 NEWSWEEK DIGITAL LLC.

This story was originally published April 30, 2026 at 12:03 PM.