More than six weeks into the war with Iran, investors have repeatedly shrugged off the sky-high price of oil, sending the S&P 500 soaring back to record highs.
That exuberance on Wall Street offers a sharp contrast with the hardships facing many Americans, who are feeling the financial blowback of a conflict that President Trump once promised would be brief but seems to have no end in sight.
With high gas prices cutting deeply into many families’ budgets, the U.S. economy is under increasing strain, raising the odds that inflation will worsen, unemployment will rise and growth will slow this year.
Under Mr. Trump’s original timeline, America’s entanglement in the Middle East was supposed to have been completed by now, paving the way for a swift reduction in energy costs that have roiled consumers and businesses around the world.
Instead, Mr. Trump’s war remains at a standstill, governed by a fragile cease-fire between Washington and Tehran. Among economists, the persistent uncertainty means that it is no longer a question of if, but rather, how much the standoff will come to impede U.S. growth and worsen inflation.
For many families and businesses, some of the economic toll exacted by the war is already evident. The price of Brent crude, the world’s benchmark, has whipsawed above $100 per barrel, while gasoline averages around $4.10 per gallon nationally, according to AAA. That is more than $1 per gallon higher than before the war began.
The energy surge has threatened to make airfares and groceries more expensive, raised costs for farmers and driven up interest rates for consumers, adding to the difficulty that many Americans already face in purchasing a home. Yet Mr. Trump and his top advisers have continued to project confidence about the nation’s economic outlook, while brushing aside the early signs of damage.
Asked if gas prices would retreat in time for the midterm elections in November, Mr. Trump conceded earlier this week that “it could be the same or maybe a little bit higher.” But he seemed to reverse course days later, telling Fox Business in an interview that aired Wednesday that he had been misquoted, and that gas would be “much lower” by Election Day.
Mr. Trump also seemed to express surprise that the economy — and the stock market — had not suffered far greater setbacks “in the midst of everything” with the war.
“There is a hit,” the president said, “because you know, we go through it for whatever it is, six weeks — there is going to be a hit, but it’s going to recover, I think, fully somehow.”
Economists have cautioned that it is difficult to measure the costs of an unpredictable war. But they agree that U.S. economy is at a crossroads, and that its trajectory hinges on whether Washington and Tehran can reach a lasting peace.
By Thursday, officials in Pakistan sought to host a new round of talks between the two warring parties, but formal negotiations had not been announced. At a news conference at the Pentagon, Pete Hegseth, the defense secretary, renewed a threat to bomb civilian infrastructure in Iran if leaders there did not agree to a deal.
Offering its latest snapshot of the costs of the war, analysts at Goldman Sachs predicted on Sunday that the U.S. economy would grow more slowly, and prices would rise at a greater clip, than it projected before the conflict. They also predicted that the unemployment rate would reach 4.6 percent this year, up from 4.3 percent in the latest federal gauge.
David Kelly, the chief global strategist at JPMorgan Asset Management, said that the pressure could eventually ease — and oil prices could plunge — if the war is “settled this week with some sort of win-win solution.” He said that would entail the resumption of safe oil shipments, particularly in the Strait of Hormuz.
But, Mr. Kelly added, the economic shocks would be much greater if fighting between the United States and Iran were to restart, especially if a return to military operations affects energy infrastructure throughout the Middle East.
“Then, you’ve got a more serious problem,” he said.
The White House has declined to furnish detailed projections for the economy this year. But Pierre Yared, the acting chair of the Council of Economic Advisers, said in an interview this week that the United States had entered the war in a “very strong situation,” and was “well positioned to withstand” a spike in oil prices that he described as “temporary.”
“That increase in the price can generate inflation while the price is rising, and then once the conflict is over, you can have a reversal of that increase,” Mr. Yared said.
But the war has nonetheless created new political challenges for Mr. Trump, precisely when he had been trying to convince Americans that his policies have improved families’ finances. This week, the administration had planned to tout its signature new tax cuts in time for the April 15 tax filing deadline. Instead, the White House found itself on the defensive about the economic toll of the war.
Appearing at an event hosted by CNBC, Scott Bessent, the Treasury secretary, acknowledged on Wednesday that the spike in gas prices could cut into Americans’ tax refunds, which he described as more generous under Mr. Trump. Federal data suggest those refunds are not as large as the White House once predicted.
Still, Mr. Bessent stressed at a White House briefing that day that he believed gas prices could fall to around $3 per gallon by the summer, adding that the timetable for relief would hinge on the negotiations.
“I’m optimistic that sometime between June 20 and Sept. 20 that we can have $3 gas again,” he said.
The risk of a protracted war also seemed to create new challenges for the Federal Reserve, where policymakers appeared newly wary about future interest rate reductions now that fear of inflation has intensified.
Thomas I. Barkin, president of the Federal Reserve Bank of Richmond, acknowledged in an interview on Wednesday that the war in Iran had created tension between the Fed’s two goals of low, stable inflation and a healthy labor market. He warned that a prolonged period of higher gas prices risked “putting a squeeze on the consumer,” but he stressed that overall spending has held up well so far, even as Americans seek ways to defray higher costs.
“The oil price spike, like many supply shocks, is negative to both sides of our mandate,” Mr. Barkin said. “You can convince yourself to lean in one direction or lean in the other direction,” he said of the Fed’s interest rate decisions.
Despite that uncertainty, Mr. Trump and his deputies continued to make the case this week for swift and steep rate cuts, dismissing recent economic turbulence as a temporary setback.
At an event hosted by the news organization Semafor, Kevin Hassett, the director of the White House National Economic Council, insisted on Tuesday that the Trump administration had made an “enormous amount of progress” on affordability.
His comments came days after the government’s own inflation gauge showed a rise in prices, driven by rising gas costs. Yet Mr. Hassett said he still believed the economy would grow by about 4 to 5 percent this year, a faster clip than many of his peers have projected.
“Right now, I guess the question is, are we confident that the economy is going to be strong this year? And we really are, because we have so many positive effects we’re seeing in the data,” Mr. Hassett said.
Tony Romm is a reporter covering economic policy and the Trump administration for The Times, based in Washington.
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