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

# Dong Jing

Source: Wall Street CN

Latest data shows the average price of gasoline in the U.S. has topped $3.1 per gallon, with analysts forecasting it will rise to $3.25–$3.50 per gallon by Easter Sunday. This directly undermines Trump’s core pledge to curb inflation. Market watchers warn that with inflation having exceeded the Federal Reserve’s 2% target for five consecutive years, adding fresh price pressures now makes stagflation a plausible risk.

U.S. military action against Iran is passing costs directly to ordinary American households via oil prices. The rapid surge in gasoline prices not only erodes Trump’s central political promise to tame inflation but also casts a shadow over his economic agenda as midterm elections draw near.

According to data from the American Automobile Association (AAA), the national average price of regular gasoline rose to $3.109 per gallon on Tuesday—higher than when the Biden administration left office and a sharp jump from $2.951 a week earlier. Wholesale pressures are even more acute: RBOB futures have surged from around $2.30 late last week to $2.50, signaling further upside for retail prices.

Tom Kloza, an analyst at Gulf Oil, warned that “what has happened in the past 72 hours is highly inflationary” and projected gasoline prices will reach $3.25–$3.50 per gallon on Easter Sunday.

Diane Swonk, chief economist at KPMG U.S., stated bluntly: “With inflation having run above the Fed’s 2% target for five straight years, layering on new price pressures at this juncture is deeply concerning.” She explicitly noted that stagflation is “not out of the question”.

Analysts also point out that the impact of rising oil prices has spilled over into monetary policy. As oil prices climb and inflationary pressures intensify, the Fed’s rate-cut path risks being derailed.

### Inflationary Political Pressure Surges, Trump’s Pledge Put to the Test

The immediate trigger for this gasoline price rally is the joint U.S.-Israeli military strikes on Iran and Tehran’s subsequent retaliation, sparking fears of global crude supply disruptions.

Kloza further warned that if the conflict spreads to oil infrastructure in Saudi Arabia, Kuwait, and other regional producers, “it would introduce variables we have never seen before”—implying the tail risks of the current situation extend far beyond Iran itself.

Gasoline prices vary sharply across the U.S., ranging from $2.624 per gallon in Oklahoma to $4.674 in California. While overall prices remain well below the historic peak of over $5 per gallon seen after the 2022 outbreak of the Russia-Ukraine war, the rapid upward trend alone is enough to trigger market alarm.

Gasoline prices are one of the most visible inflation gauges for American consumers, and their rise directly hits Trump’s political standing.

Trump is seeking to convince voters he can rein in inflation—a core issue weighing on his approval ratings—with just months to go until midterm elections that will determine whether Republicans retain control of both chambers of Congress.

Ed Morse, senior advisor at Hartree Partners, noted that “40% of the economy consists of people with no savings, living paycheck to paycheck.” If gasoline rises to $3.50–$4 per gallon, “it will inevitably hit a huge swath of the population.”

White House Press Secretary Karoline Leavitt responded that administration policies have driven U.S. oil production to record highs, adding that the Department of Energy and 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 edged up recently, it is projected to decline in 2026.

### Energy Producers Benefit, but Wealth Effects Fail to Trickle Down

Some analysts argue rising oil prices are not entirely negative for the U.S. economy. As one of the world’s largest energy exporters, American energy producers stand to gain directly from higher prices.

Jeff Currie, head of energy strategy at Carlyle Group, said: “The U.S. exports roughly as much oil as Saudi Arabia. Wouldn’t we want prices to go up? Consumers in Chicago may suffer in the short term, but when energy producers in Texas get richer, they spend too.”

Yet the 2022 energy crisis sparked by the Russia-Ukraine war provides a counterexample. A study published in September 2025 found that over 50% of the excess profits from that energy price surge ultimately flowed to the wealthiest 1% of Americans.

Gregor Semieniuk, a professor at the University of Massachusetts and one of the study’s authors, pointed out that “wealth distribution does not change overnight.” Shareholders of major U.S. oil companies will again be in the best position to benefit, while ordinary households bear the brunt of price pressures.

### Rate Expectations Under Pressure, Rate-Cut Path at Risk of Disruption

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

CME data shows market expectations for more than two 25-basis-point rate cuts in the federal funds rate (currently 3.50%–3.75%) this year have cooled significantly compared to before the U.S.-Israel attack on Iran.

Swonk noted that with tariff effects and sticky services inflation still lingering, the arrival of high oil prices further narrows the Fed’s policy room.

Analysts warn that if the conflict lasts longer than Trump’s projected four to five weeks, persistently high oil prices will directly derail his political calculus of securing rate cuts before the midterms.

Trump is scheduled to meet with Treasury Secretary Bethancourt and Energy Secretary White later Tuesday local time to discuss response measures.

## Risk Warning and Disclaimer

Markets are subject to risks; investment requires caution. This article does not constitute personal investment advice and does not account for the specific investment objectives, financial situations, or needs of individual users. Users should assess whether any opinions, views, or conclusions in this article align with their specific circumstances. Investment decisions based on this article are made at the user’s own risk.