As President Donald Trump prepares to visit China for crucial talks with the leader of the No. 2 global power, it is becoming clear that the political and economic damage caused by the Iran war cannot easily be reversed. Even if a deal is reached tomorrow to get oil tankers moving again – and there are no signs of that happening – Americans face new inflation worries for months or longer.
The question now is not whether Trump has pursued his war aims with dignity. The question is whether their presidency will ever recover from the effects of the war.
Trump is hoping for a little political goodwill from the stock market, which is setting new records. S&P 500 Since February 27, just before the US and Israel attacked Iran, there has been a 7.3% increase. Trump’s net approval rating, meanwhile, has fallen to the lowest in his two terms, according to CNBC’s All-America Economic Survey.
Stocks are rising due to confidence in artificial intelligence and traders’ well-earned sense that Trump will find a way out of major economic risks. But the market is fragile and could collapse if the disruption continues, JPMorgan analysts wrote in a note sent to clients on Monday.
“A temporary shock, even a large one, can be tolerated. A prolonged disruption cannot be tolerated,” the analysts wrote.
Analysts conclude that because the mounting damage is so severe, Iran or the US will withdraw by June. Given Trump’s major decisions to back off from tariffs and threats over Greenland, for example, it’s a reasonable bet for a Wall Street firm.
But the decision that the pain will become so intense that one side will have to retreat has serious implications for Americans already struggling to pay at the pump — not to mention Trump’s political standing.
Given the scale of the supply disruption, oil prices are – counterintuitively – relatively low at the moment. global benchmark brent Crude oil futures hit $104 a barrel on Monday, up 44% since the start of the war, but still below the highs set by Russia’s invasion of Ukraine in 2022.
The price of a gallon of gas in the US averaged $4.50 on Tuesday, a 44% increase from last May. Diesel is up 61%.
Iran has closed the Strait of Hormuz, the narrow passage that tankers need to transit to reach the Persian Gulf, where they can refuel in Saudi Arabia and other Middle Eastern energy giants. The closure means one-fifth of the world’s oil supply will not be accessible through normal routes.
Those countries have made great progress in getting oil moving again. But they can only do so much, Amin Nasser, CEO of Saudi Aramco, the world’s biggest oil producer, said on an earnings call Monday.
“If the current disruption continues at this rate, the closure of the Strait of Hormuz will result in a market loss of approximately 100 million barrels per week,” Nasser said.
Countries are able to use existing oil reserves to keep their economies stocked with refined products such as gasoline and jet fuel. But these reserves could be “seriously depleted” by this summer, Nasser said.
Nasser said, “If the Strait of Hormuz opens today, it will take several months for the market to rebalance. And if its opening is delayed by a few more weeks, normalization will take until 2027.”
That doesn’t mean how long it will take to clear the mines left by Iran in the strait, he said.
Iran’s Ambassador to China Reza Rahmani Fazli Tuesday’s post on X Pressing Tehran’s issue with Beijing, he said that relations between the two are so strong that America cannot overcome them.
The bottom line is that higher energy prices are inevitable for the foreseeable future. accounts for almost half of the price of crude oil price of a gallon of gasAccording to the Energy Information Administration.
And the US elections are less than six months away. The 2026 midterm elections will be an important referendum on Trump and the Republican Party as they seek to retain a lock on both houses of Congress.
State and federal taxes account for 18% of gas prices — which is why Trump is pushing for a federal gas-tax holiday. Stopping the tax would likely require action by Congress, and if successful could lead to attacks on Americans in other ways. The US Treasury estimates the government will borrow $2 trillion next year to finance the deficit, while the debt stock this month crossed the psychological threshold of 100% of GDP. Besides, gas taxes primarily finance highway maintenance – and every local politician can tell the President that potholes are politically unpopular.
Debt cuts amid a costly war are likely to put pressure on long-term Treasury yields as debt increases. 10 year treasure The note rose to 4.4% on Tuesday. This is standard for large amounts of consumer loans, and a longer 10-year term means more expensive rates for mortgages, car loans and credit cards. The 10-year bullish trend also poses a threat to the stock market, as it gives investors a way to get risk-free returns from the government.
In other words, there is little Trump can do in the short term to extricate himself from the power bind created by the Iran war. This will be inevitable for Republicans in the midterms, and will influence Trump’s every choice going forward.
All this will be the backdrop to Trump’s talks with Chinese leader Xi Jinping after the landing of Air Force One on Wednesday. Xi has his own problems, but in a dictatorship, public opinion is far less critical than in the US, and if Trump asks for help in ending the Iran war, Xi may have to pay a high price.
Or perhaps Xi will simply sit and wait and watch the economic turmoil escalate. But in the zero-sum world that Trump has helped make a reality, the US will pay the price of the Iran war one way or another.