Gas prices climbed, mortgage costs soared and investors on Wall Street grew jittery this week, intensifying a political maelstrom surrounding President Trump with just over a month until voters cast their ballots in the 2026 midterm election.
For Americans stung by years of persistently high prices, the end of September brought little obvious relief, as a long unresolved war with Iran continued to ripple across the U.S. economy in ways that made the nation’s battle with inflation all the more vexing.
Oil prices whipsawed around $100 per barrel while costs at the pump remained high, with a gallon of gasoline reaching an average of nearly $4.50 nationally by Friday, according to AAA. The more concerning spike occurred in diesel, which topped $6.50 per gallon, raising the possibility that high transportation and shipping costs could make groceries and other goods more expensive soon, too.
The energy shock fanned fears of worsening inflation, which consequently sent yields on some government bonds to the highest level in more than two decades. That made federal borrowing more expensive, but the problem was not confined to Washington, as the sharp turn in yields also sent rates on 30-year mortgages surging above 7 percent by the week’s end.
The headwinds left many investors convinced that the Federal Reserve could raise interest rates as soon as next month, which would be its second increase in as many meetings. But Mr. Trump spent much of the week trying to present the economy as a resounding success, citing a surge in investment and a boom in construction, driven in no small part by the exuberance around artificial intelligence.
Speaking at the United Nations, the president also raised the prospect that he could still yet escalate the war with Iran, now in its seventh month. While he reaffirmed his calls for Tehran’s disarmament, Mr. Trump nonetheless swatted away any concerns about the electoral implications of the conflict or its costs.
“I gave absolutely no credence and will not give credence to the election when it comes to Iran; it doesn’t even enter my mind,” Mr. Trump declared.
The comments offered a stark contrast with a growing roster of polls that show Americans now blame Mr. Trump for their financial woes. Even though the president maintains that the midterms have no bearing on his geopolitical strategy, the consequences of the ongoing conflict are now top of mind for most voters — raising the odds that they could exact revenge on Republicans this November.
“If you ask people what the economy is doing, their answer is what gas prices are doing,” said Michael Faulkender, who served at the Treasury Department under Mr. Trump and is now co-chair of a trade-focused initiative at the America First Policy Institute, a right-leaning group.
Mr. Faulkender acknowledged the ways in which those high gas prices had hurt some Americans, as he argued that the war with Iran would result in a safer world with more stable oil. Otherwise, he said, the economy is robust, thanks to a healthy labor market, strong growth and moderating prices in categories unaffected by war.
“And yet,” Mr. Faulkender continued, “voters say the economy is doing poorly. If you line up the generic ballot with gas prices, they line up really well together.”
Among most economists, the projection has remained largely unchanged: Inflation is likely to end the year above 3 percent, as geopolitical concerns accelerate price increases above the 2 percent target specified by the Federal Reserve
The pressures have helped to sour the public mood about the state of the economy. A measure of consumer sentiment tracked by the University of Michigan dipped in September to its lowest level in four months, according to data released Friday, driven in part by Americans’ fears that inflation may yet worsen.
The dim outlook has inspired the more hawkish turn recently at the Fed, which voted in September to raise rates for the first time in three years in a bid to contain inflation when the economy overall is running hot.
That growth has been a favored talking point for Mr. Trump, who insists that the economy can continue to expand without causing prices to rise faster. The view has informed Mr. Trump’s demands for staggering rate cuts — a risky move — while his advisers have tried to head off an increase just before the election.
At an event on Wednesday hosted by Georgetown University, Kevin Hassett, the director of the White House National Economic Council, insisted that a rate increase would be too political in nature, as he criticized some of the Fed’s governors as “unusually partisan.”
In doing so, Mr. Hassett added there was no need for the Fed to raise rates, arguing that prices are trending in the right direction. He said a better forecast of inflation would look more narrowly at the change in prices excluding volatile categories, including food and energy, over the last three months annualized.
In a statement, Kush Desai, a White House spokesman, said Mr. Trump had “always been clear about market disruptions as a result of the Iran conflict.” Mr. Desai added that there had also been “dramatic month-over-month price reductions” in certain categories, including beef. (Beef prices did fall over that period, but remain elevated compared with last year, federal data show.)
If anything, the jawboning underscored a hard political truth: There may not be much the Trump administration can do on its own to tame inflation quickly in a nation that has struggled with rising prices since the coronavirus pandemic.
Even an immediate end to hostilities with Iran might not return gas prices, in particular, to their prewar levels before the midterms, economists generally agree. At the pump, prices by Friday were more than $1 higher per gallon than they were a year ago, according to AAA. A gallon of diesel was almost $3 higher, adding to the strain on shippers and farmers.
At one point this week, Mr. Trump went as far as suggesting that the administration could respond to the surge by instituting a new ban on U.S. diesel exports. But the suggestion drew sharp rebukes across the political spectrum, including from conservative groups like the Heritage Foundation, which argued that it would backfire, curtail U.S. production and offer little solace for American diesel users.
As the concerns about the war and its costs spilled again onto Wall Street, the Trump administration similarly grasped for ways to drive down soaring yields on government bonds. This month, Treasury Secretary Scott Bessent commenced a plan to force down those yields by buying back billions of dollars in older federal debt.
But the tumult in the bond market owes to a combination of long-known, long-unresolved economic hazards, including rising U.S. debt — so investors largely shrugged off the attempted intervention. Because those yields influence rates on consumer borrowing, including auto loans and mortgages, the administration’s gambit translated to little relief for families.
It was especially evident in housing, which Mr. Trump had promised to address at the start of the year. Jeff Ostrowski, a housing market analyst for Bankrate, said his firm’s survey showed that rates on a 30-year mortgage were “more than a full percentage point higher” than before the war with Iran.
“These higher rates are not good news for first-time buyers that are struggling to afford a home,” he said, adding that for many Americans, “it’s not getting any easier for them.”
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