Home loans, gas, groceries: How the Iran war could upend Trump's touted economic gains

Shannon PettypieceWed, March 4, 2026 at 10:26 PM UTC

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A week ago, President Donald Trump stood before Congress and made the case that his economic agenda was working. The stock market was up, gas prices were down, inflation was slowing and mortgage rates were dropping.

Less than four days later, he began bombing Iran and threw those gains into jeopardy.

Aside from the human toll from the war, the fighting in the Middle East has rattled markets and upended supply chains, threatening to drive prices higher for American consumers on everything from home loans to groceries. It comes as Americans already have an increasingly negative view of the economy, with consumer sentiment falling over the past year.

The extent of the economic impact from the war with Iran will depend on how long it lasts, and it will take time for the effects to trickle down to consumers. Trump has said the conflict could last four to five weeks, but on Tuesday he indicated it could stretch longer.

While it’s unclear what comes next, here are some of the ways the war is already jeopardizing the Trump administration’s economic gains:

Gas prices

One of the most notable improvements in the economy, which Trump has frequently touted, has been declining gas prices. During his State of the Union address, Trump said the price of gas under former President Joe Biden “was quite honestly a disaster,” before describing how low gas prices had fallen during the first year of his second term.

The numbers Trump cited were misleadingly low — he claimed, for instance, gas in Iowa was $1.85, but the only fuel that has been near that price there is a special blend of ethanol fuel used in a fraction of vehicles. Still, the average price for a gallon of gas last year was down to $3.10, a 21-cent drop compared to the prior year. Gas prices had fallen further in January, but over the past week have jumped 22 cents, to $3.20 a gallon, according to AAA. Gas prices could rise another 10 to 30 cents per gallon over the next two weeks, according to gas price tracker Gas Buddy.

Iran produces a small share of the world’s oil, but the fighting in the region has shut down the Strait of Hormuz, a narrow waterway in the Persian Gulf that provides passage to more than 20% of the world’s oil. The shipping disruption has caused Iraq to cut its oil production because, with exports at a standstill, its storage facilities were filling up.

Trump has acknowledged that oil prices will go up as a result of the conflict, but indicated he is taking steps to get shipments moving in the region. He said in a social media post Tuesday that the U.S. Navy could escort ships through the passageway “if necessary,” and that the U.S. would offer insurance guarantees to shippers, though he didn’t offer further details.

“If we have a little high oil prices for a little while — but as soon as this ends, those prices are going to drop, I believe, lower than ever before,” Trump said on Tuesday.

Another option to try to lower prices would be releasing oil from the country’s Strategic Petroleum Reserve, oil industry analysts have suggested.

“U.S. government is going to step in, and when it is appropriate and should it be needed, the U.S. Navy will provide safe passage through the straits there for the oil tankers,” Treasury Secretary Scott Bessent said Wednesday on CNBC.​​

Higher prices, jostled supply chains

Inflation has been slowing over the past year, and though it’s still slightly higher than the Federal Reserve’s target, it is down from the decades-high seen in 2022. That has given Trump a key selling point for his economic agenda.

“The Biden administration and its allies in Congress gave us the worst inflation in the history of our country,” Trump said during the State of the Union last week. “But in 12 months, my administration has driven core inflation down to the lowest level in more than five years.”

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But prices could begin to tick up at a faster rate amid the bombings in the Middle East. Goldman Sachs estimated that inflation could rise to 2.7% by May from the rate of 2.4% in December.

“If it’s not prolonged it’s not going to be a major inflationary hit,” JPMorgan Chase CEO Jamie Dimon told CNBC on Monday. “If it went on for a long time, that would be different.”

The Strait of Hormuz also handles about one-third of the world’s fertilizer. Fertilizer prices, which were already at their highest levels in decades, have been rising over the past week. This comes at a bad time for farmers in much of the U.S. who are preparing for the spring planting season.

The war in the Middle East is also threatening to disrupt global supply chains, with some companies already rerouting shipments away from the region. Global shipping giant Maersk said it would stop sending some of its ships through the Red Sea, rerouting them on a much longer route around the southern tip of Africa. At least one container ship has been hit in the region since the war began.

Air cargo has also been disrupted because of air travel restrictions. About 13% of air cargo goes through the Middle East, either on cargo planes or in the bellies of commercial airliners.

Trump threw another wrench into global trade on Tuesday, saying the U.S. would cut off all trade with Spain because of the country’s lack of support for the attacks on Iran.

Higher home loans

The U.S. housing market might seem far removed from the fighting in the Middle East, but the war with Iran is driving mortgage interest rates higher, making it more expensive for Americans to borrow money for a home.

Housing affordability has been a top issue for Americans in recent years, and in his State of the Union, Trump claimed that the average mortgage payment was down by $5,000 a year, as mortgage interest rates declined from nearly 7% when he took office to 5.98% before the attacks on Iran.

But those rates have been rising again this week and were up to 6.13% on a 30-year fixed rate mortgage on Tuesday before ticking down slightly on Wednesday, according to Mortgage News Daily. Mortgage rates are closely linked to the price of U.S.10-year Treasury bonds, and the yield on those bonds has gone up in recent days amid concerns the conflict will contribute to higher inflation.

Higher inflation, a measure of how much prices are increasing, could also cause the Federal Reserve to hit the brakes on interest rate cuts, which are also linked to home mortgage rates.

The White House said the administration will continue its economic strategy of lower taxes, fewer regulations and more tariffs.

“Americans can rest assured that as this agenda continues taking effect, and as Congress passes more of the President’s healthcare and housing affordability agenda, the best is yet to come in the second Trump term,” White House spokesman Kush Desai said.

Stock market

One of the key drivers of the economy during Trump’s first year of his second term has been gains in the stock market, with the S&P 500 up 13% during those 12 months. That has especially benefited wealthier households, which are the most likely to own stocks and have been driving a significant amount of spending.

“We have millions and millions of people, because the stock market has done so well, setting all those records — your 401(k)s are way up,” Trump said during the State of the Union.

But the fighting in the Middle East has weighed on stocks this week; after a volatile few days, the market recovered somewhat on Wednesday though is still up less than 1% for the year. There have also been winners in the market — defense contractors RTX Corp, Northrop Grumman and Axon Enterprises all saw their shares jump this week.

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Source: “AOL Money”