Wall Street Surges While War Inflation Strains Main Street Budgets

Seven weeks into the war with Iran, the stock market has climbed to record heights. The S&P 500 keeps reaching new peaks, as if the conflict were happening somewhere else entirely. But for millions of Americans filling their gas tanks and buying groceries, the war is not abstract. It is a line item on every household budget.

Brent crude, the global benchmark for oil prices, has climbed above $100 a barrel. Gasoline now averages $4.10 per gallon across the country—more than a dollar higher than it was before the fighting began. That gap compounds quickly. A family that spent $50 to fill a tank now spends $65. A business that budgeted $10,000 a month for fuel now budgets $13,000. Farmers face higher costs. Airlines raise ticket prices. The price of moving goods moves up with it. Grocers pass the cost along. The ripple spreads outward, touching everything.

President Trump had promised the conflict would be brief. Seven weeks in, there is no end in sight. The war exists in a fragile ceasefire, governed by uncertainty. Among economists, the question is no longer whether the standoff will damage the economy, but how much damage it will do. Goldman Sachs, analyzing the situation this week, predicted slower growth and higher inflation than it had forecast before the fighting started. The firm also projected unemployment would reach 4.6 percent this year, up from 4.3 percent. Those are not small shifts. They represent millions of people.

The White House has moved to contain the narrative. Pierre Yared, the acting chair of the Council of Economic Advisers, described the situation as temporary. The United States entered the war in a strong position, he said, and was well positioned to absorb the shock. Once the conflict ends, he suggested, prices would fall back down. Treasury Secretary Scott Bessent offered a timeline: gas prices could return to around $3 a gallon sometime between late June and late September, he said, if negotiations moved quickly. But that timeline depends on something the administration does not control—the willingness of both sides to reach a deal.

Trump himself has sent mixed signals. Earlier in the week, he acknowledged that gas prices might stay the same or rise higher by the November midterm elections. Days later, he told Fox Business he had been misquoted, and that prices would be "much lower" by Election Day. He also expressed surprise that the stock market had not fallen further "in the midst of everything." There is a hit to the economy, he said, but it will recover.

The Federal Reserve faces its own dilemma. Thomas Barkin, president of the Federal Reserve Bank of Richmond, acknowledged this week that the war has created tension between the Fed's two main goals: keeping inflation low and stable, and maintaining a healthy job market. Higher oil prices squeeze both. They push inflation up and can slow hiring. The Fed had been considering interest rate cuts. Now, with inflation fears intensifying, that path is less clear. Barkin noted that consumer spending has held up so far, but warned that prolonged high gas prices risk "putting a squeeze on the consumer."

Kevin Hassett, director of the White House National Economic Council, insisted this week that the administration had made "enormous progress" on affordability. He predicted the economy would grow 4 to 5 percent this year, faster than many economists expect. But his comments came days after the government's own inflation gauge showed prices rising, driven largely by gas costs. The disconnect between what the White House is saying and what households are experiencing has become difficult to ignore.

David Kelly, chief global strategist at JPMorgan Asset Management, offered a more sobering view. If the war is settled quickly with a deal that allows oil shipments to resume safely through the Strait of Hormuz, prices could fall sharply and the economic pressure could ease. But if fighting resumes and spreads to energy infrastructure across the Middle East, the damage would be far more serious. "Then you've got a more serious problem," he said. For now, the economy hangs in that space between those two possibilities, waiting to see which way events will turn.