U.S. gasoline prices soar as Trump's "Iran gamble" begins to pay the price

The U.S. military actions against Iran are directly impacting ordinary American households through rising oil prices. The rapid increase in gasoline prices not only undermines Trump's core political commitment to suppress inflation but also casts a shadow over his economic agenda as the midterm elections approach.

According to data from the American Automobile Association (AAA), the national average price for regular gasoline rose to $3.109 per gallon on Tuesday, which is not only higher than the level when the Biden administration left office but also a significant jump from $2.951 a week ago. The pressure in the wholesale market is even more pronounced—RBOB futures have surged from about $2.30 last weekend to $2.50, indicating that retail prices still have room to rise further.

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

KPMG's U.S. Chief Economist Diane Swonk stated bluntly that "with inflation having exceeded the Federal Reserve's 2% target for five consecutive years, adding new price pressures at this time is concerning," and she explicitly mentioned that the risk of stagflation "is not impossible."

Moreover, analysts have pointed out that the impact of rising oil prices has extended to monetary policy. As oil prices climb, inflationary pressures intensify, potentially disrupting the Federal Reserve's path to interest rate cuts.

Inflationary Political Pressure Intensifies, Trump's Promises Face Test

The immediate trigger for this round of gasoline price increases is the military strikes launched by the U.S. and Israel against Iran and Tehran's subsequent retaliatory actions, which have sparked expectations of global oil supply disruptions.

Tom Kloza further noted that if the conflict spreads to oil infrastructure in Saudi Arabia, Kuwait, and other areas, "it will introduce variables that have never been seen before," suggesting that the tail risks of the current situation extend far beyond Iran itself.

Currently, gasoline prices in the U.S. vary significantly—from $2.624 per gallon in Oklahoma to $4.674 in California. Although overall prices are still far below the historical peak of over $5 following the outbreak of the Russia-Ukraine conflict in 2022, the rapid upward trend itself is enough to alert the market.

Gasoline prices are one of the most direct indicators of inflation perceived by the American public, and their rise poses a direct challenge to Trump's political situation.

Trump is currently trying to prove to voters that he has the ability to tame inflation—this is precisely the core issue that has pressured his approval ratings, and there are only a few months left until the midterm elections that will determine whether the Republican Party can maintain control of both the House and Senate.

Hartree Partners senior advisor Ed Morse pointed out that "40% of the economy consists of those who live paycheck to paycheck without savings," and once oil prices rise to between $3.50 and $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 historic highs and stated that the Department of Energy and the Department of Treasury "will continue to monitor oil price trends and do everything possible to maintain price stability." However, data from the U.S. Energy Information Administration (EIA) shows that while U.S. oil production has recently increased slightly, it is expected to decline by 2026

Energy producers benefit, but the wealth effect is hard to be inclusive

Some analysts point out that the rise in oil prices is not entirely negative for the U.S. economy— as one of the world's largest energy exporters, U.S. energy producers will directly benefit from the price increase.

Jeff Currie, Chief Energy Strategist at Carlyle Group, stated, "The U.S. export volume is roughly comparable to that of Saudi Arabia; wouldn't you want oil prices to go up? In the short term, consumers in Chicago will be harmed, but once energy companies in Texas become wealthy, they will also spend."

However, the energy crisis triggered by the Russia-Ukraine conflict in 2022 has provided a counterexample. According to a study published in September 2025, over 50% of the excess profits generated by soaring energy prices at that time ultimately flowed to the wealthiest 1% of Americans.

Gregor Semieniuk, a professor at the University of Massachusetts and one of the authors of the study, pointed out, "Wealth distribution does not change overnight," and shareholders of large U.S. oil companies will once again be in the most advantageous position to benefit, while ordinary households will bear the brunt of price pressures.

Interest rate expectations under pressure, rate cut path may be disrupted

The impact of rising oil prices has extended to the monetary policy level.

CME data shows that compared to before the U.S. attack on Iran, market expectations for more than two 25 basis point rate cuts in the federal funds rate (currently in the range of 3.5% to 3.75%) this year have significantly cooled.

Diane Swonk noted, with high oil prices coming in, the tariff effects and the stickiness of service sector inflation have not yet dissipated, and the multiple pressures have further narrowed the Federal Reserve's policy space.

Analysts point out that if the conflict lasts longer than Trump's expected four to five weeks, high oil prices will directly block his political calculations for seeking rate cuts before the midterm elections.

Reports indicate that Trump will meet with Treasury Secretary Yellen and Energy Secretary Granholm later on Tuesday to discuss response strategies