A week ago, President Donald Trump stood before Congress and touted cheap gas. Prices had recently fallen to a nationwide average of $2.92 per gallon, the lowest stretch since 2020, according to AAA (1). At a Texas energy rally just hours before the first airstrikes, the mood was triumphant.

Seven days later, gas has blown past $3.40 a gallon, according to AAA — the highest national average since September 2024. After the U.S. and Israel launched strikes on Iran, WTI crude surged more than 35% in a single week to close above $90 a barrel — its biggest weekly gain in the history of the futures contract, which dates back to 1983 (2).

And the President's response? He told Reuters he's not worried about it.

"They'll drop very rapidly when this is over, and if they rise, they rise, but this is far more important than having gasoline prices go up a little bit," Trump said in an exclusive interview on Thursday (3).

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Behind closed doors, the tone is apparently different. White House Chief of Staff Susie Wiles has reportedly warned in internal meetings that failing to act on rising prices would be "catastrophic" for Republicans heading into the November midterms. Energy Secretary Chris Wright and Wiles have both been reaching out to oil CEOs to discuss options, according to White House press secretary Karoline Leavitt.

Trump said he's not looking to tap the Strategic Petroleum Reserve, the same emergency stockpile he criticized President Biden for drawing down, and expressed confidence that the Strait of Hormuz, through which roughly a fifth of the world's oil passes daily, will remain open.

But the Strait is already in crisis. Traffic has ground to a near standstill. Iraq has shut down 1.5 million barrels per day of production. Kuwait has started cutting output after running out of storage space. Qatar's energy minister warned that crude could hit $150 per barrel if tankers can't get through.

JPMorgan estimates that production cuts could approach 6 million barrels per day by the end of next week if the Strait remains closed.

In other words, this might be a lot more than gas prices rising "a little bit."

Here's what most people don't think about when they see oil prices spike: by the time a barrel of crude gets refined and burned in your car, it's already touched almost everything else in your life.

Oil doesn't just power your commute. It powers the trucks that deliver your groceries, the ships that carry your electronics, the tractors that plow the fields where your food is grown, and the factories that make the plastics, chemicals, and materials in virtually every product you buy. Because nearly everything in the economy needs to be transported, higher fuel costs ripple outward into consumer prices across the board.

How much? A Federal Reserve Bank of Dallas analysis published last year modeled this exact scenario — a closure of the Strait of Hormuz pushing WTI crude to $100 per barrel — and found that it could add roughly 1.3 percentage points to headline inflation at its peak, with core inflation rising by about 0.3 percentage points. The effects fade within months as the one-time price shock works through the system, but in the near term, the impact is real (4).

Wall Street estimates tell a similar story. Goldman Sachs said a sustained 10% rise in oil prices would boost headline CPI by about 0.28 percentage points and core CPI by just 0.04, and that in scenarios where oil stays elevated for several months, year-over-year headline inflation could temporarily climb back toward 3%. Apollo Global's Torsten Sløk estimated that a $50-per-barrel spike would add a full percentage point to second-quarter inflation (5). Oil is up roughly $28 per barrel since last Saturday.

U.S. inflation had cooled to 2.4% in January, its lowest reading since May — and the Federal Reserve was finally within sight of its 2% target. Even a temporary spike back toward 3% or above would mark a significant setback, putting added pressure on an already strained consumer and likely delaying the rate cuts many Americans have been counting on.

The pass-through to food prices is worth watching closely. Agriculture is deeply dependent on diesel, petroleum-derived fertilizers, and long-haul freight — all of which are directly tied to the price of crude. Research from the Federal Reserve has consistently found that oil shocks push food prices higher even more reliably than they affect core inflation.

The inflation picture was already more fragile than the White House wanted to admit. Now it's being stress-tested by a shooting war in the world's most important oil-producing region.

To be fair, most economists are urging caution, not panic. Many note that oil spikes driven by Middle Eastern conflicts have historically proved temporary, and the U.S. produces far more of its own energy than it did during previous crises.

Morningstar DBRS's Ravikanth Rai, associate managing director of energy and natural resources ratings, said in a statement cited by CNBC that it remains unclear whether the price increase will persist because the conflict is still in its early stages (6).

Not everyone is sounding the alarm. RSM chief economist Joseph Brusuelas argued that the U.S. economy is far less vulnerable to oil shocks than it was a generation ago. "In today's American economy, spikes in oil prices do not present the same significant downside risk to top-line economic growth or inflation as they did a half century ago," Brusuelas told CNBC.

Still, duration matters a great deal. Trump has outlined a four-to-five-week timeline for the military campaign, a projection that political and military analysts have questioned, noting the administration hasn't clearly articulated its end goal. If the conflict drags on, previous inflation forecasts can be thrown out the window.

Traders are now in near-consensus that the Federal Reserve will hold interest rates steady at its March meeting, and bets that rates will remain untouched through June have strengthened as officials weigh higher energy costs against slowing growth.

New York Fed president John Williams said this week that the conflict could affect the near-term inflation outlook. "We'll have to see how persistent this is and how long this is, but it would have an effect on overall inflation," Williams told reporters (7). Minneapolis Fed president Neel Kashkari said he was no longer as confident in his previous call for a rate cut this year, noting that "with the geopolitical events, we need to get a lot more data in" (8).

In plain English: don't count on rate cuts to ease your mortgage or car payment anytime soon.

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You can't control what happens in the Strait of Hormuz. But you can get ahead of what's coming for your wallet.

Start with your budget. Gas prices have jumped roughly 50 cents a gallon in a week. For a household running two cars, that works out to an extra $40 to $60 a month just in fuel — and that's before the indirect costs hit. Grocery prices tend to lag oil by two to three months as higher diesel and freight costs work through the supply chain, so what you're paying at the pump today will show up at the checkout counter by summer.

If you're invested in the market, resist the urge to sell into the volatility. Oil-driven selloffs tend to be sharp but short-lived. The S&P 500 fell roughly 25% after Russia invaded Ukraine in early 2022 and recovered within months. The bigger risk is locking in losses by selling at the bottom and missing the rebound.

For cash you're holding on the sidelines, high-yield savings accounts are still paying above 4% APY — which means your emergency fund can at least partially keep pace with rising prices. And if you're looking for a direct inflation hedge, Treasury Inflation-Protected Securities (TIPS) and Series I Savings Bonds both adjust with the Consumer Price Index. Neither will make you rich, but they're designed for exactly this kind of environment.

The rate-cut timeline matters here too. If inflation climbs back toward 3%, the Fed is unlikely to cut rates anytime soon — which means mortgage rates, auto loan rates, and credit card rates stay elevated. If you've been waiting for cheaper borrowing costs before making a big purchase, that timeline just got longer.

President Trump may not be concerned about gas prices. But if you're one of the millions of Americans already stretched thin by the cost of living, you probably should be — and not just because of what it costs to fill your tank.

Oil touches nearly everything you buy — from the diesel that moves your groceries to the petroleum-derived fertilizers that grow them to the freight costs baked into every online order. When crude spikes 35% in a week, those costs don't stay at the pump. They ripple outward, and they take months to fully arrive.

The conflict may be brief. Trump says four to five weeks. But even a short disruption has already erased a year's worth of progress on gas prices and put the Fed's rate-cutting timeline in jeopardy. The Americans who come through this in the best shape won't be the ones who predicted what happens next — they'll be the ones who didn't wait to find out.

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AAA (1); CNBC (2, 6); Reuters (3); Federal Reserve Bank of Dallas (4); Yahoo Finance (5); Bloomberg (7, 8)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.