Renewed fighting with Iran has sent oil and gas prices soaring, creating immediate inflationary pressure on the U.S. economy. The spike in energy costs threatens to undermine consumer spending and business investment that have underpinned recent economic resilience.

Compounding the energy shock, President Trump has imposed new global tariffs that could push up prices further across a broad range of imported goods. The tariffs risk triggering retaliatory measures from trading partners, potentially disrupting supply chains and raising costs for American manufacturers and households alike.

Economists warn that the simultaneous energy and trade shocks create a stagflationary risk — rising prices alongside slowing growth. The Federal Reserve faces a difficult policy choice: raise interest rates to combat inflation or hold steady to support growth. Either path carries significant risks for the labor market and financial stability.

The combined impact of Middle East conflict and protectionist trade policy represents the most serious test of economic durability in years. Policymakers must navigate a narrow path to avoid a downturn while containing price pressures.