U.S. gasoline prices soar, Trump's "Iran gamble" begins to pay off

U.S. military actions against Iran are directly impacting ordinary American households through oil prices. The rapid rise in gasoline prices not only challenges Trump’s core political promise to curb inflation but also casts a shadow over his economic agenda as the midterm elections approach.

According to AAA data, the national average for regular gasoline rose to $3.109 per gallon on Tuesday, surpassing the level at the end of the Trump administration and significantly higher than last week’s $2.951. Wholesale market pressures are even more pronounced—RBOB futures have surged from about $2.30 to $2.50 since last weekend, indicating further retail price increases are possible.

Gulf Oil analyst Tom Kloza warned that “what has happened in the past 72 hours is highly inflationary,” and expects gasoline prices to reach between $3.25 and $3.50 per gallon by Easter Sunday.

KPMG Chief Economist Diane Swonk stated plainly that “with inflation already exceeding the Federal Reserve’s 2% target for five consecutive years, adding new price pressures now is concerning,” and explicitly mentioned that stagflation risk “is not impossible.”

Moreover, some analysts point out that the impact of rising oil prices has extended to monetary policy. As oil prices climb, inflationary pressures intensify, potentially disrupting the Fed’s rate cut plans.

Inflation political pressures are mounting, testing Trump’s promises

The immediate trigger for this round of gasoline price increases was the joint U.S.-Israel military strike on Iran and Tehran’s subsequent retaliations, which have sparked expectations of global oil supply disruptions.

Kloza further noted that if the conflict spreads to oil infrastructure in Saudi Arabia, Kuwait, and other regions, “it will introduce variables never seen before,” implying that the tail risks of the current situation go well beyond Iran itself.

Currently, gasoline prices across the U.S. vary widely—from $2.624 per gallon in Oklahoma to $4.674 in California. While overall prices remain well below the over $5 peak following the Russia-Ukraine conflict in 2022, the rapid upward trend itself has already raised market alertness.

Gasoline prices are one of the most direct indicators of inflation perceived by Americans, and their rise poses a direct challenge to Trump’s political standing.

Trump is currently trying to demonstrate to voters that he can tame inflation—and this is precisely the core issue pressuring his approval ratings, just months before the midterm elections that will determine whether Republicans retain control of Congress.

Ed Morse, senior advisor at Hartree Partners, pointed out that “40% of the economy consists of people without savings, living paycheck to paycheck,” and if oil prices reach $3.50 to $4 per gallon, “it will inevitably impact a large portion of the population.”

White House Press Secretary Karoline Leavitt responded that government policies have driven U.S. oil production to record highs, and said the Energy and Treasury Departments “will continue to monitor oil prices and do everything possible to maintain stability.” However, EIA data shows that while U.S. oil output has recently increased slightly, it is expected to decline again by 2026.

Energy producers benefit, but wealth effects are hard to spread

Some analysts suggest that rising oil prices are not entirely negative for the U.S. economy—since the U.S. is one of the world’s largest energy exporters, energy producers will directly benefit from higher prices.

Jeff Currie, Chief Commodity Strategist at Goldman Sachs, said, “U.S. exports are roughly comparable to Saudi Arabia’s; wouldn’t you want oil prices to go up? Consumers in Chicago might suffer in the short term, but once Texas energy companies get richer, they will also spend.”

However, the energy crisis triggered by the Russia-Ukraine conflict in 2022 provides a counterexample. A September 2025 study found that over 50% of the excess profits from soaring energy prices ultimately flowed to the wealthiest 1% of Americans.

Gregor Semieniuk, professor at the University of Massachusetts and one of the study’s authors, said, “Wealth redistribution doesn’t change overnight,” and that shareholders of major U.S. oil companies will once again be the biggest beneficiaries, while ordinary households bear the brunt of price pressures.

Interest rate expectations are under pressure, and the rate cut path may be disrupted

The impact of rising oil prices has extended into monetary policy.

CME data shows that, compared to before the U.S.-Israel attack on Iran, market expectations for the federal funds rate (currently between 3.5% and 3.75%) to be cut by more than two 25-basis-point reductions within the year have significantly cooled.

Diane Swonk noted that “with high oil prices arriving, the effects of tariffs and sticky service sector inflation have not yet receded,” and multiple pressures are further narrowing the Fed’s policy options.

Analysts warn that if the conflict lasts longer than Trump’s expected four to five weeks, high oil prices could directly thwart his political plans to secure rate cuts before the midterm elections.

It is reported that Trump will meet with Treasury Secretary Bostick and Energy Secretary White later Tuesday to discuss response strategies.

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