Oil prices surged more than 10 percent Sunday night, a direct consequence of President Donald Trump’s military strikes against Iran, according to market analysis. The benchmark U.S. Crude oil market opened Monday at $75 per barrel, a level not seen in months, and continued to climb throughout the week.
Until the outbreak of conflict, the Trump administration had, by design or circumstance, achieved a financial trifecta: declining oil prices, falling Treasury yields, and a weakening U.S. Dollar. The escalation in the Middle East now threatens to unravel that alignment, introducing modern inflationary pressures and complicating the administration’s economic messaging.
President Trump acknowledged the immediate impact on energy costs, stating, “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 even before.” He made the comments to reporters in the Oval Office, defending the military action as necessary to prevent a wider conflict and, specifically, the development of nuclear weapons by Iran. “If we didn’t do what we’re doing right now, you would’ve had a nuclear war,” Trump asserted, characterizing the Iranian regime as “sick people” and “crazy.”
The national average price for a gallon of gasoline rose 11 cents overnight Tuesday, reaching approximately $3.11, according to the American Automobile Association. Economists are divided on the potential duration and severity of the price increases. Some believe the impact could be temporary, as has been the case with previous Middle East conflicts, while others warn of prolonged disruptions to shipping routes and supply chains that could amplify inflationary pressures beyond gasoline prices.
A key point of concern is Iran’s control of the Strait of Hormuz, a critical shipping route through which approximately 20 percent of the world’s oil supply passes. Experts have long identified the closure of the Strait as a worst-case scenario for oil prices. Rory Johnston, a Canadian oil market researcher, noted that the market had already begun to price in the risk of a more aggressive U.S. Stance toward Iran, mitigating the initial shock, but the aftermath of the strike that killed Ayatollah Ali Khamenei, Iran’s supreme leader, has introduced significant uncertainty.
In response to the escalating tensions, President Trump announced the deployment of the United States Development Finance Corporation to provide “at a very reasonable price, political risk insurance and guarantees for the Financial Security of ALL Maritime Trade, especially Energy, traveling through the Gulf.” He further stated that the U.S. Navy would begin escorting tankers through the Strait of Hormuz “as soon as possible,” emphasizing the United States’ commitment to ensuring the “FREE FLOW of ENERGY to the WORLD” and asserting that the nation’s “ECONOMIC and MILITARY MIGHT is the GREATEST ON EARTH.”
The conflict is occurring at a precarious time, as President Trump has been emphasizing the taming of inflation. The surge in oil prices threatens to undermine this narrative and complicates the case for potential interest rate cuts. Thierry Wizman, a global FX and rates strategist at Macquarie Group, observed that “war has proven to be ‘inflationary,’ as it is associated with negative supply shocks.”
The price of Brent crude jumped to almost $80 a barrel when markets opened Sunday evening, a nearly 13 percent increase over Friday’s prices. The United States conducted the strikes alongside Israel, with the stated objective of dismantling Iran’s nuclear and missile capabilities. The White House has not yet outlined a clear path toward de-escalation, and Iranian officials have not publicly responded to the offer of insurance guarantees or naval escorts.
