Before the US and Israel launched attacks on Iran in late February many Americans were already strained by the post-pandemic jump in housing, food and healthcare costs, and the compounding effects of Donald Trump’s tariff agenda. Now they face higher petrol prices, too. In the steepest monthly increase since at least 1967, costs at the pump surged by 21.2 per cent in March, pushing overall inflation to a two-year high. Consumer sentiment has since plunged to a record low, according to the University of Michigan — a damning backdrop for a president who campaigned to “make America affordable again”.
The longer the conflict goes on, the deeper the domestic economic fallout will be. Although the US is a net energy exporter, the bottleneck in the Strait of Hormuz has disrupted global fuel supplies and US refiners have raised their prices amid higher demand. Trump’s efforts to blockade the shipping route — a vital artery for oil, gas and other raw materials — will only add pressure. Beyond higher heating and transport costs, soaring fertiliser prices since the war began are likely to feed through to groceries. Rising inflation expectations also point to the US Federal Reserve keeping interest rates higher for longer.
Even so, the US economy remains more resilient than most. The IMF’s latest projections, released on Tuesday, trimmed America’s growth forecast for 2026 by 0.1 percentage points to a solid 2.3 per cent, and still the fastest in the G7. For now, AI investment is propping up activity and buoying domestic stock markets — though a prolonged war could threaten the global chip supply chain on which the nation’s build-out of data centres depends.