Iran Conflict Sends Oil Prices Soaring, Threatening US Inflation and Economy

US oil prices rose over 5% to $75.22 a barrel on Tuesday, while gas prices at the pump jumped 11 cents to $3.11 per gallon. The Iran conflict is raising inflation concerns after nearly five years of escalating prices. Economists say the extent of the impact depends on how long the conflict lasts and whether the Strait of Hormuz is blockaded. Approximately one-fifth of the world's oil and gas passes through this route. Inflation could exceed 3% for the first time since early 2024 if the conflict persists for several months. The Federal Reserve (Fed) may have to delay interest rate cuts.

The Iran conflict emerges at the worst possible time for the US economy. While Donald Trump attempts to propagate a 'golden era,' Americans remain weary from the unhealed wounds of the 2021-2023 price hikes. Now, gas prices are reversing course and rising again.

The critical question is not whether oil prices will rise, but for how long and by how much. Every additional $10 per barrel of oil will push gas prices up by 25 cents. If oil exceeds $100, Americans will face gas prices of $3.50 or higher. Airfares will become more expensive, and rising transportation costs will lead to escalating goods prices.

But the psychological impact is the greatest danger. Business confidence is wavering after Trump's wave of tariffs, with the labor market being the weakest since 2002 if recessions are excluded. Add a prolonged war to the equation, and companies will further tighten spending and hiring.

The Fed is stuck between two bad options: keep interest rates high to curb inflation, or cut them to stimulate a sluggish economy. Neel Kashkari from the Minneapolis Fed stated clearly that before the conflict, he supported at least one rate cut this year, but now he needs to 'see more data.' Wall Street projected two cuts, but the probability is diminishing.

Trump claims oil prices will fall 'lower than before' after the war ends. But that's a risky bet. Americans don't care about future promises when they fill up today and see the numbers jump on the pump screen. With public opinion already skeptical of Trump's economic capabilities, every additional cent at the pump further erodes trust.

Vietnamese small business owners will face a dual impact: rising gas costs will push up goods transportation prices, while customers tighten spending due to economic concerns. Multigenerational families, common within the Vietnamese community, will distinctly feel the pressure as travel costs increase—from taking children to school, commuting to work, to visiting relatives. Those planning to purchase homes or cars will have to recalculate if the Fed delays rate cuts, keeping mortgage and auto loans expensive.