U.S.–Iran Conflict Fuels Inflation, Undermines Trump’s Approval and Tests Fed Independence

In late February 2024 Iran blocked most commercial shipping through the Strait of Hormuz, while the United States imposed a naval siege on Iranian ports. A two-week cease-fire agreed on 8 April was later extended indefinitely by President Donald Trump, but duelling blockades keep global energy supplies strained and keep regional tensions high.

Al Jazeera (website)

The blockade has pushed U.S. gasoline to $4.17 per gallon, up from under $3 pre-war. Brent crude rose to $108 a barrel, and analysts warn that oil above $120 a barrel raises recession risk. Benchmark LNG for June delivery into northeast Asia reached $16.70 per MMBtu, a 61 percent increase over pre-war levels. Fertiliser prices have more than doubled, and the cost of urea, aluminium and other industrial chemicals has surged as cargo traffic stalls.

A Reuters/Ipsos poll (24-27 April) found Trump’s overall approval at 34 percent, with only 22 percent approving his handling of the cost of living. An AP-NORC survey a week earlier reported 33 percent overall approval and 30 percent approval of his economic management. A Marquette Law School poll showed 32 percent approval of his war strategy, rising to 65 percent among Republicans but still indicating intra-party dissent. In a Tuesday social-media post, Trump claimed Iran had entered a “State of Collapse” and urged the “Open the Hormuz Strait” effort.

Al Jazeera (website)

Jerome Powell’s eight-year tenure included pandemic-era liquidity injections that “expanded the balance sheet to nearly $9 trillion” and kept credit flowing, actions praised as “close to flawless” by Jean-Baptiste Wautier. However, his August 2021 statement that inflation effects would be “transitory” later proved inaccurate as headline inflation hit 9.1 percent in summer 2022. Critics note a September 2024 rate cut of 50 basis points as a misstep that “spurred some of the awkwardness now.” Throughout, Powell defended Fed independence against repeated pressure from Trump, who threatened to fire him and attempted to replace board member Lisa Cook. A Justice Department investigation into Powell was dropped after congressional threats to block Trump’s successor nomination.

Business Insider

Right-wing commentators and a segment of Republican voters have voiced opposition to the war, questioning its strategic value. Economists such as Chester Spatt criticize the 2024 rate cut, while Ben McMillan labels the “transitory inflation” comment a “mess.” In Australia, chief economist Greg Jericho warns that fuel-price spikes will “continue” and that the government’s reluctance to tax the gas industry limits policy options. Professor Tina Soliman-Hunter argues the nation is only at “tier two” of its fuel-security plan and should move to “tier three” to mitigate price volatility.

Polls differ on Trump’s approval (34 percent vs. 33 percent) and on war-handling ratings (32 percent vs. 65 percent among Republicans). Goldman Sachs raised its Brent-price forecast to $90 a barrel, while other analysts cite a $120 a barrel recession threshold, reflecting uncertainty about future supply. No definitive timeline exists for a permanent resolution of the Strait of Hormuz blockage, and broader economic impacts beyond energy remain under-reported.

Al Jazeera (website)

• “Iran has just informed us that they are in a ‘State of Collapse,'” — Donald Trump, social-media post.

Al Jazeera (website)

• “The pandemic response was close to flawless,” — Jean-Baptiste Wautier, financial and global economic policy leader, Wautier Family Office.

Business Insider

• “We expect the inflation effects of these increases to be transitory.” — Jerome Powell, former Fed chair (August 2021).

Business Insider

• “I think he'll go down as a huge hero for having defended Fed independence,” — Desmond Lachman, senior fellow, American Enterprise Institute.

Business Insider

• “I think we need to expect more of the same and a little more tightening of belts,” — Tina Soliman-Hunter, co-director, Transforming Energy Markets Research Centre, Macquarie University.

The cease-fire remains indefinite as diplomatic talks stall, while the November 2026 midterm elections loom amid Trump’s low approval. Powell is set to chair his final Federal Open Market Committee meeting this week, a session that may shape his long-term reputation. In Australia, the Reserve Bank of Australia is expected to raise the cash rate to 4.35 percent in May, with inflation forecasts climbing toward 4.6 percent. Continued disruptions in the Strait of Hormuz could push oil and commodity prices higher, extending inflationary pressures worldwide.