Media analysis suggests that the latest Middle East conflict may add another blow to the already dissatisfied American economy, with only eight months remaining until the U.S. midterm elections.
For the American public, the most immediate impact is likely to be reflected in higher gasoline prices. On Monday afternoon, crude oil prices in New York rose by about 8%. Just days before the U.S. and Israel launched their attacks, Trump boasted in his State of the Union address about lowering oil prices. For American consumers who have experienced multiple price hikes since the pandemic, the drop in oil prices was a significant highlight. Trump referred to the oil prices during his predecessor's term as &#34;a disaster&#34; in his speech to Congress last week.
Gasoline prices have historically played a significant role in shaping Americans' perceptions of the economy. Given that about one-fifth of the world's seaborne oil and gas is typically transported through the Strait of Hormuz, which is controlled by Iran, the situation in the Middle East has a particularly pronounced effect on oil prices. Since the outbreak of conflict on Saturday, tanker transport volumes have significantly decreased.
Industry insiders predict that if transportation does not resume, crude oil prices could stabilize above $100 per barrel. If oil prices reach this level, the national average gasoline price in the U.S. could rise from the current $3 per gallon to about $4.50. This alone could increase the overall inflation rate by 1.5 percentage points and create a ripple effect through channels such as airfare and transportation costs.
Currently, due to a significant increase in domestic crude oil production, the U.S. has transformed into an energy exporter, making it less susceptible to oil price shocks than in the past. However, the distribution effects remain evident.
Some analysts point out that while the U.S. may have achieved energy independence, rising prices will still squeeze consumption, and the income flowing to energy producers will not immediately translate into spending. Other analysts believe that the U.S.'s status as a net energy exporter could unexpectedly boost GDP, and the market's initial reaction is not yet sufficient to pose a &#34;substantial risk to U.S. growth or inflation prospects.&#34;
The U.S. economy has previously shown resilience against the backdrop of Trump's tariff policies and immigration crackdowns. The key to the economic impact of this war lies in how long the conflict lasts. Trump stated on Monday that the U.S. expects the bombing campaign to last four to five weeks but is also prepared to extend it for &#34;as long as necessary.&#34; U.S. Defense Secretary Lloyd Austin denied that this would evolve into the kind of &#34;endless war&#34; that Trump opposed, stating, &#34;This is not Iraq; this will not be an endless war.&#34;
The duration of the conflict will determine the extent to which oil and gas transportation from Gulf producing countries is disrupted, which in turn will affect the gasoline bills paid by the American public. If the conflict becomes prolonged, there are broader risks, including a new round of supply chain issues.
Economists caution that it is still too early to determine how this action aimed at regime change in Iran will impact the energy market.
Recent polls show that most Americans no longer approve of Trump's handling of the economy and his signature policies, such as tariffs. This contrasts sharply with the way he won in 2024 by capitalizing on voter dissatisfaction with inflation.
Analysts are assessing what might happen if the conflict drags on or escalates, leading to increased disruptions:
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Economists at the French investment bank Natixis envisioned a scenario in their Sunday report: this year, U.S. economic growth slows to between 0.5% and 1.5%, while inflation rises; another scenario is that the economy contracts for at least two consecutive quarters. The worst-case scenario is based on an escalation of the war impacting global shipping, thereby squeezing corporate profit margins through higher costs and logistical bottlenecks.
Former PIMCO chief Mohamed El-Erian pointed out that soaring insurance premiums, ships turning around or rerouting, and disruptions in air transport could cumulatively lead to &#34;a new wave of stagflation shocks sweeping the global economy.&#34;
Additionally, the war has led to a decline in the U.S. stock market, while the previous rise in U.S. stocks supported consumer spending, which could potentially hinder U.S. economic growth.
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Assessing the impact of monetary policy is even more complex. While rising energy prices will push up inflation, the squeeze on household finances may also suppress growth.
The Middle East conflict has also posed new challenges for the Federal Reserve. The Fed has paused interest rate cuts and is wary of a resurgence of inflation. Former U.S. Treasury Secretary and former Fed Chair Janet Yellen stated on Monday that this makes the Fed more hesitant to cut rates.
In fact, even before the outbreak of the Middle East conflict, recent price data had already raised concerns at the Fed. The minutes from the January Fed policy meeting indicated that if inflation remains stubbornly high, some officials even believe that rate hikes may be necessary. In this regard, media analysis suggests that to shift Fed policy, we need to see a significant and sustained impact of the Iran war on oil prices, leading to a decoupling of U.S. inflation expectations. Both scenarios are possible, but neither is guaranteed.
Analysis indicates that all of this, along with the political costs the Republican Party, led by Trump, may incur in November, depends on the direction of the war.

CRAK

The situation in Iran has driven oil prices to soar, and gasoline prices have historically played a significant role in shaping Americans' perceptions of the economy. Analysts state that the duration of the conflict will determine the extent to which oil and gas transportation from Gulf oil-producing countries is disrupted, thereby affecting the gasoline bills paid by the American public. Recent polls show that most Americans no longer approve of Trump's handling of the economy and his signature policies, such as tariffs

- The latest conflict in the Middle East is expected to negatively impact the already dissatisfied U.S. economy just months before the midterm elections.  
- Rising gasoline prices, projected to reach approximately $4.50 per gallon, could increase overall inflation by 1.5 percentage points due to reduced oil transport amid geopolitical tensions.  
- The continuation of the conflict and its length will significantly influence energy prices and, consequently, consumer spending and economic growth in the U.S.

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Inflation risks resurface ahead of the U.S. midterm elections, industry insiders: The Iran conflict may erode Republican support rates