Trump’s War in Iran Drives Up US Gas Prices, Threatening Economic Outlook

Donald Trump’s military actions in Iran have triggered a sharp increase in US petrol prices, potentially undermining his administration’s efforts to address affordability concerns ahead of the November midterm elections. The surge in prices comes as Trump seeks to convince voters he can tame inflation.

Gasoline Price Surge

As of Tuesday, March 3, 2026, the average price for regular gasoline reached $3.109 per gallon, according to motor club AAA [1]. This is higher than prices at the end of the previous administration and up from $2.951 a week prior. The increase is directly linked to disruptions in global crude supplies caused by the US-Israel attack on Iran and Tehran’s subsequent counteroffensive.

Analyst Concerns

Gulf Oil analyst Tom Kloza warned that the situation is “very inflationary,” predicting gasoline prices could reach $3.25 to $3.50 per gallon by Easter Sunday [1]. He cautioned that further disruptions to oil logistics in Saudi Arabia or Kuwait could exacerbate the problem.

Ed Morse, a senior advisor at Hartree Partners, highlighted that 40% of the US economy consists of individuals living paycheck to paycheck. A rise to $3.50 or $4 per gallon would significantly impact a large portion of the population [1].

Administration Response

White House Press Secretary Karoline Leavitt stated that the administration’s policies have “led to the highest production of US oil ever” and that the Department of Energy and the Treasury will continue to monitor markets and attempt to stabilize prices [1].

However, estimates from the US Energy Information Administration suggest US oil production is expected to decline in 2026 [1].

Economic Implications

The US economy is less vulnerable to oil price shocks than Europe, importing only 17% of its energy in 2024 – the lowest proportion in 40 years [3].

Analysts suggest that increased profits for US energy producers could offset some of the negative impacts on consumer spending. Jeff Currie, chief strategy officer of energy pathways at Carlyle, noted that US energy producers, like Saudi Arabia, benefit from higher oil prices [1].

However, research indicates that the benefits of energy booms are not evenly distributed, with the wealthiest 1% of the US population receiving over 50% of the windfall profits during the oil and gas crisis sparked by Russia’s invasion of Ukraine in 2022 [1].

Potential for Stagflation

Diane Swonk, chief economist at KPMG US, warned that higher gas prices, combined with lingering tariffs and sticky services inflation, raise concerns about stagflation – a situation where prices rise and economic growth slows [1].

Conflict Duration and Rate Cuts

If the conflict extends beyond the four to five weeks anticipated by President Trump, it could derail hopes for interest rate cuts ahead of the midterms. Market data indicates a reduced likelihood of more than two quarter-point rate cuts to the federal funds rate, currently at 3.5 to 3.75% [1].