The yield on the 10-year Treasury note ended the week at about 4.73%, while the 30-year yield stood near 5.27%, according to market data reported by The Wall Street Journal (WSJ). Both remain close to their highest levels in years. The latest rise came despite the Treasury Department’s decision to increase its purchases of outstanding long-dated government bonds in an attempt to steady the market.

The intervention briefly pushed yields lower, but the relief did not last. Investors quickly returned their attention to the forces driving the sell-off: persistent inflation, heavy government borrowing, geopolitical risks and uncertainty over the Federal Reserve’s future interest-rate path.

The episode highlights a growing problem for Washington. The US government can influence the supply and maturity of Treasury debt, but it cannot easily dictate the return investors demand to hold it. As deficits expand and the stock of federal debt rises, investors increasingly want compensation for inflation and fiscal risk.

That pressure is becoming more significant as the national debt has passed USD 40 trillion for the first time. Reuters reported this week that the milestone is intensifying concern over the government’s rising interest bill, which is already competing with major federal spending programmes.

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The Treasury reported that total federal debt had reached about USD 39.9 trillion on Monday (August 17), leaving the world’s largest economy only a small step from the landmark figure.

The acceleration has partly lost government revenue following the US Supreme Court’s decision to invalidate President Donald Trump’s “Liberation Day” tariffs, which has partially driven the acceleration.

The Congressional Budget Office (CBO) had projected six months ago that total borrowing would reach USD 39.4 trillion during the current fiscal year. The shortfall in tariff revenue has instead forced the Treasury to borrow more quickly to meet government spending commitments.

The fiscal deterioration comes as the US bond market is already under pressure. Long-term Treasury yields have risen sharply this year amid concerns over persistent inflation, large budget deficits, heavy government borrowing, and geopolitical uncertainty.

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The Ministry of Trade and Industry (MTI) lifted its forecast to 4.5%-5.5%, from its previous range of 2%-4%. It is the second upgrade this year, after the government initially forecast growth of 1%-3%.

The upgrade followed stronger-than-expected first-half performance. Singapore’s economy expanded 5.9% year on year in the second quarter, slightly ahead of the 5.7% advance estimate, taking the first-half growth to 6.1%.

Manufacturing was a major driver, expanding 12.5% in the second quarter, compared with 7.3% in the first. Growth was led by electronics and precision engineering as global demand for AI-related hardware remained strong.

Wholesale trade grew 8.3%, supported by higher sales of machinery and equipment, telecommunications products, computers, and electronic components. Finance and insurance expanded 6.2%, helped by stronger bank lending, fee income, and fund-management activity.

MTI said the global AI investment boom had been stronger than expected and was providing significant support to economies embedded in the global technology supply chain. Further increases in AI-related capital spending could provide additional momentum for Singapore during the rest of the year.

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Retail ‌trading remained robust during the quarter as heightened market volatility, driven in part by the Iran war and its impact on inflation expectations and the Federal Reserve’s interest-rate outlook, kept investors active.

Adjusted earnings came in at 48 cents per share, topping analysts’ average estimate of 44 cents, according to data compiled by LSEG.

While the total net revenues increased 32% year-over-year to USD 1.31 billion, transaction-based revenues increased 44% year-over-year to USD 776 million, primarily driven by event contracts revenue of USD 156 million, up over 10 times.

Options revenue reached USD 342 million, up 29%. Equities revenue touched the USD 129 million mark, with a 95% quarterly hike. Cryptocurrencies revenue stood at USD 100 million, down 38%.

Robinhood’s net interest revenues increased 9% year-over-year to USD 389 million, primarily driven by growth in interest-earning assets, while partially offset by lower short-term interest rates and securities lending activity.

Other revenues increased 54% year-over-year to USD 143 million, primarily driven by Trump Account service revenues and increased Robinhood Gold subscription revenues.

Net income increased 48% year-over-year to USD 573 million, including USD 129 million of gains primarily related to the deconsolidation of Robinhood Ventures Fund I (RVI).

“The business is firing on all cylinders. We delivered record revenues and drove new highs across equity, option, and event contract volumes, as we continue to win market share. Our product velocity continues to deliver new products for customers and drive a more diversified business, with Robinhood Legend and the Credit Card business joining our growing roster of now thirteen different business lines that have reached $100 million-plus in annualized revenues,” said Shiv Verma, Chief Financial Officer of Robinhood.

“Whether it’s the Robinhood Chain, Robinhood Ventures, or Trump Accounts, our product velocity is focused on one goal: making everyone an owner. Broad ownership is essential to a free, stable, and prosperous society,” said Vlad Tenev, Chairman and CEO of Robinhood.

However, Robinhood’s muted performance at the crypto bank can also be attributed to the rapid expansion of prediction markets, that has shifted investor focus away from the virtual currency, with analysts expecting the industry shift to play a massive role in Robinhood’s revenue mix.

Other reasons behind crypto sector’s poor run have been weaker digital asset prices, persistent market volatility and a shift in investor interest toward AI-related assets.

Interest in prediction markets surged during the 2024 ‌United States ⁠presidential election, boosting user engagement and trading activity.

“This was not merely a prediction-market beat. Robinhood delivered better-than-expected transaction revenue, NII, deposits, subscription growth and expense control simultaneously,” said Bill Birmingham, managing director at REX Financial.

Third Bridge analyst Jacob Zuller told the Reuters that prediction markets had evolved from a curiosity into arguably ⁠Robinhood’s most important growth driver. He further added that prediction markets would serve as a customer acquisition funnel for the venture.

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The ministry further said the deficit was 26% lower than the budgeted deficit of OMR 620 million (USD 1.61 billion), attributing the improvement primarily to higher oil and gas revenues.

Total revenues, on the energy front, amounted to OMR 8.481 billion (approximately USD 22 billion), including net oil revenues of OMR 6.640 billion (USD 17.26 billion). The average realized oil price stood at USD 72 per barrel, compared with the budget assumption of USD 60 per barrel.

“Average oil and condensate production reached 999,000 barrels per day, slightly below the budgeted level of 1.001 million barrels per day, reflecting Oman’s commitment to the voluntary production cuts agreed under the OPEC+ framework,” the Finance Ministry report stated.

Net gas revenues, on the other hand, totalled OMR 1.841 billion (USD 4.78 billion), supported by an increase in the average liquefied natural gas (LNG) selling price from the estimated USD 5.41 to USD 7.49 per unit.

“Non-oil revenues reached OMR 3.641 billion (USD 9.46 billion) by the end of 2025,” according to the report.

“Total public debt stood at OMR 14.6 billion (USD 36.41 billion) at the end of 2025, down by OMR 15 million (USD 39 million) from 2024, while all financing requirements were met and liability management operations were carried out without increasing the overall debt level,” it added further.

Talking about the Oman economy, the Gulf nation fared better compared to its regional peers in terms of showing resilience against the volatilities emerging from the US-Iran war, as the location of its major ports outside the Strait of Hormuz bottleneck, along with continued policy reforms, helped Muscat stay afloat.

As per the International Monetary Fund (IMF), favourable oil prices and continued commitment to fiscal discipline will generate sizable fiscal and external surpluses for the nation in the coming days.

An IMF team, led by Abdullah AlHassan (mission chief for Oman & Afghanistan), was in Muscat during June 7-15, 2026, to discuss economic and financial developments, the outlook, and the country’s policy priorities.

AlHassan told the Times of Oman, “Oman’s oil and natural gas infrastructure has remained largely unaffected, enabling Oman to increase oil production and exports amid regional supply disruptions. The banking sector remains well-capitalized and liquid, benefiting from strong buffers heading into the regional conflict and prudent oversight by the Central Bank of Oman (CBO).”

“The strong growth momentum continues. Real gross domestic product (GDP) growth accelerated in 2025 to 2.4% (from 1.6% in 2024), supported by both the hydrocarbon and non-hydrocarbon activities. Growth is projected at around 3.7% in 2026, driven by increased oil production, and 3% in 2027,” the senior official further added.

However, as per the IMF, a worrying point for Muscat will be the non-hydrocarbon sector, whose growth is expected to ease to 2.5% in 2026, reflecting the impact of the Iran war on tourism and construction.

However, the global monetary body sees the blip as a temporary one, as the growth in 2027 will again accelerate to 3.2% on the back of a broad-based recovery. Average inflation remained contained at 1% in 2025 before rising to 2.8% (year-on-year) during January-May 2026, driven by higher food and transportation prices.

In his final remarks, Al Hassan said, “Oman’s fiscal and external positions are set to strengthen, supported by higher oil revenues and continued fiscal discipline. After narrowing to 0.6% of GDP in 2025, reflecting lower oil prices and increased capital spending, the fiscal surplus is projected to widen to 4.5% of GDP in 2026 and 4.2% in 2027. Central government debt continues its downward trajectory, reaching 34.7% of GDP at 2025 end.”

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As per the IATA, the industry-wide revenue passenger kilometres (RPK), a key measure of passenger demand, will grow by 2.1% year-on-year in 2026. The forecast marks a notable moderation compared to the stronger growth recorded in recent years.

According to the association, geopolitical hostilities involving the United States, Iran and Israel have triggered an energy shock that is expected to push up oil and aviation fuel prices, increasing operating costs for airlines and affecting consumer spending worldwide.

“The sharp increase in oil prices and the even greater surge in fuel costs weigh on both our industry and the macroeconomic environment,” IATA stated further.

As per the global aviation body, while global economic growth could slow by around half a percentage point to 2.5% in 2026, inflation may rise to 5%, reducing household purchasing power and affecting travel demand.

Among the regions, the conflict-ridden Middle East is expected to witness the sharpest travel demand decline, with passenger traffic projected to contract by 11.4% in 2026. IATA attributed the downturn to factors like airspace restrictions, operational challenges and a significant loss of transfer traffic resulting from the Iran war.

“The impact is unsurprisingly the most severe in this region, which faces airspace limitations and other operational constraints, resulting in a significant loss of transfer traffic,” IATA noted.

Africa, on the other hand, is emerging as a new growth arena, with IATA’s forecast predicting the strongest passenger traffic growth at 10% in 2026. However, as per the association, the increase will come from a relatively low base compared to the other regions.

The Asia-Pacific region is expected to remain the largest contributor to global passenger growth, with traffic projected to rise by 5.1% and account for more than half of the overall increase in global demand.

“Europe’s passenger traffic is forecast to grow by 2.8%, supported partly by rerouted traffic from disrupted Middle Eastern long-haul routes,” IATA said, while noting a growing preference among European travellers for leisure travel and visits to the closed ones within closer destinations.

“Passenger traffic in Latin America is projected to increase by 5%, aided by relatively resilient regional economies. Meanwhile, growth in North America is expected to remain subdued at 0.8%, reflecting the maturity of the market and a slowing US economy, particularly in the domestic travel segment,” IATA stated further.

Despite the slowdown, IATA said the global aviation industry remains resilient, as it concluded, “Overall, we expect the 2026 passenger outlook to slow meaningfully but nevertheless remain positive. While growth is weaker and more uneven across regions, the industry continues to expand, highlighting its remarkable adaptability in the face of sudden and severe external shocks and passengers’ need to travel.”

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As per the report, during the quarter, the Kingdom’s economic growth, with real GDP, expanded 3% on a year-on-year basis. Gross Fixed Capital Formation (GFCF), a key measure of investment, increased 5.1% during the same period after contracting through much of 2025.

As per the Saudi Ministry of Interior’s figure, total GFCF reached SR358.3 billion, with the non-government sector accounting for SR319.9 billion, or 89% of total investment. Government investment recorded strong growth, with GFCF on the particular front surging 54% to SR38.3 billion during the quarter.

Inflationary conditions have remained stable, with the Consumer Price Index (CPI) remaining at 1.7% in April 2026. This was mostly due to a 3.8% increase in housing, water, electricity, gas, and other fuels, as well as a 1% rise in both transportation and restaurant and accommodation services. Consumer activity remained resilient, with point-of-sale (POS) transactions rising 11.8% year-on-year in April, indicating continued strength in household spending.

Meanwhile, average Brent crude prices climbed 54.2% year-on-year to USD 102.5 per barrel in April, providing support to oil-sector revenues and economic activity. Labour market indicators also improved, with Saudi unemployment falling to 7.2% in the fourth quarter of 2025, down from 7.5% in the previous quarter.

The SME sector (small and medium enterprises) too witnessed continued growth in financing that accounted for 11.5% of the total credit facilities. Credit facilities extended to the sector reached a record SR468 billion in Q4 2025, up 33% year-on-year.

“Foreign investor participation in Saudi capital markets remained strong, with foreign holdings reaching SR458 billion in May 2026,” the bulletin noted.

Despite the positive indicators, there were several areas of moderation. The Purchasing Managers’ Index (PMI) for the non-oil private sector declined 5.4% year-on-year to 52.8 points in May. However, the reading remained above the 50-point threshold that generally signals expansion.

Talking about the bigger picture, the Kingdom’s real GDP reached USD 1.31 trillion in 2025, with non-oil activities accounting for 55% of the economy, stated the National Transformation Programme 2025 Annual Report, which reviewed progress across economic development, investment, tourism, digital transformation, environmental sustainability and quality of life indicators as the Gulf major moves towards its “Vision 2030” diversification targets.

“Foreign direct investment inflows rose to USD 35.5 billion in 2025, nearly five times the level recorded in 2017, while non-oil GDP expanded by 4.9% during the year. More than 700 international companies have established regional headquarters in Saudi Arabia,” the report remarked.

While 93% of key performance indicators met or exceeded their annual targets, some 90% of initiatives were either completed or progressing as planned.

“Since the launch of Vision 2030, 935 initiatives have been completed, 225 remain on track, and more than 2,200 reforms and measures have been introduced,” the report noted.

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The military conflict involving the United States, Israel, and Iran began on February 28, 2026. It was not just a geopolitical event, but the beginning of an economic crisis reshaping the daily lives of millions of people in the United Kingdom.

This article is an attempt to explain what is happening, why it matters, and what it means for ordinary British workers, families, and businesses.

Distant war and British utility bills

The worst part of the Middle East conflict has been the blockade of the Strait of Hormuz, which passes one-fifth of all oil and LNG. Both Iran and the United States tried to play hardball with the maritime chokepoint to get the better of each other at the negotiation table in Islamabad. The biggest victim of the geopolitical power play has been global energy security.

Before the war, a barrel of Brent crude oil traded at $70-$72, but within weeks, future prices shot up to $119 per barrel. The prices that buyers were actually paying on the spot market (where oil is bought and sold for immediate delivery) reached $150 at the time, driven by intense panic buying and shortage fears.

The shock was specifically compounded for the United Kingdom, as the European country imports a large portion of its energy. Net import dependency stood at 43.8% in 2024, which means that when global energy prices spike, the UK does not have enough domestic supply to shield itself.

Wholesale gas prices inside the UK surged from 78 pence per therm at the end of February to 171 pence per therm in the weeks that followed. That is more than double in a matter of weeks.

The International Energy Agency (IEA) described what happened as the single most significant supply disruption in the history of the global oil market. Global oil supply fell by over 10 million barrels per day in March 2026 alone.

The ripple effects were felt almost immediately at petrol stations across the UK. The average price of petrol rose from 131.6 pence per litre to 140.2 pence per litre. Diesel jumped from 141.1 pence to 158.7 pence per litre. These were not gradual, creeping increases. They happened within a month.

Inflation is back, and it is stubborn

The official measure of inflation in the UK, known as the Consumer Price Index (CPI), rose to 3.3% in March 2026. That sounds like a modest number until you consider that just two months earlier, the Bank of England (BoE) had been close to hitting its 2% target and was preparing to start cutting interest rates. Those plans are now on hold indefinitely.

The largest driver of the March inflation rise was motor fuel, which went up by 8.7% in a single month. The last time fuel prices rose that sharply in a single month was during the early period of the Ukraine war. Food inflation is expected to follow.

The Food and Drink Federation has warned that food prices could rise by as much as 9% by the end of 2026 if supply disruptions continue. Part of the reason is fertiliser. Producing nitrogen fertiliser requires enormous amounts of natural gas, and many fertiliser suppliers in the Gulf and Egypt can no longer export their products because of the maritime blockade.

British farmers are facing doubled fertiliser costs, and many have decided it is simply not worth planting crops this year. Less domestic food production means more imports. More reliance on imports, in a disrupted global market, means higher prices at checkout.

There is also an unusual and little-discussed risk around carbon dioxide gas, which the food industry depends on for slaughtering livestock humanely, carbonating drinks, and preserving packaged goods.

The government has already invested 100 million pounds to reopen an industrial plant on Teesside specifically to ensure a domestic carbon dioxide supply. Major retailers like Tesco say shortages have not yet reached shelves, but the Food and Drink Federation is not ruling out significant gaps in availability by the summer if the Strait remains closed.

Growth has stalled

Britain’s economy was beginning to recover early in 2026. GDP grew by 0.5% in February, which was a small but encouraging sign. That momentum has now been cut short. The EY Item Club, one of the UK’s most respected economic forecasting bodies, now expects the economy to grow by zero in both the second and third quarters of the year. For the full year of 2026, it has cut its growth forecast from 1.4% down to 0.7%.

Matt Swannell, the Chief Economic Adviser to the EY Item Club, warns that the labour market is entering a period of severe distress. Matt remarked, “Spiralling energy costs and disruption to supply chains will push the UK to the brink of a technical recession… The heightened energy prices from the war are also set to deliver the ‘biggest hit since the pandemic’ to the jobs market, with the jobless rate projected to peak at 5.8% by the middle of 2027.”

The International Monetary Fund has gone further in some respects. It identified the United Kingdom as the country that suffered the biggest downward revision to its growth forecast among wealthy nations in its spring 2026 outlook. The IMF now expects UK GDP to grow by just 0.8% in 2026, compared to 1.3% predicted earlier.

The OECD, another major international economic body, expects Britain to have the second-lowest growth rate and the second-highest inflation rate among G7 nations. The United States, by contrast, is expected to grow by 2.3%. The gap is stark.

Why is Britain being hit harder than most? Several reasons compound each other. The UK is a net importer of gas. It has very limited gas storage, estimated at just two days of supply at the peak of the crisis. Its economy is highly integrated with international trade and supply chains. And its growth was already sluggish entering 2026, leaving very little buffer when the shock arrived.

The word economists are reaching for to describe this situation is stagflation. That is what happens when an economy stops growing, but prices keep rising. It is the worst of both worlds, and it is the same condition that devastated many Western economies in the 1970s during the oil embargo. The last thing any government wants to see return.

Jobs are being lost

Behind the big numbers are real people losing real work. British employers cut 11,000 jobs in March 2026, the first clear month where the economic fallout from the Iran conflict showed up directly in employment figures. Analysts from EY Item Club estimate that approximately 250,000 jobs could be lost by mid-2027 if current conditions persist.

The unemployment rate stood at 5.2% at the start of 2026. Forecasters now expect it to rise to 5.8% by mid-2027, which would mean over 2.1 million people looking for work. That would be the highest level of unemployment in more than a decade.

The sectors bearing the brunt are those that depend heavily on energy or on consumer spending. Manufacturing, hospitality, logistics and construction are all under severe pressure. Businesses that were already operating on thin margins are finding that rising energy costs, supply chain delays, and weakening customer demand are simply too much to absorb simultaneously.

Many companies are moving into what economists call a defensive posture. Instead of hiring, investing, or expanding, they are cutting costs and building cash reserves to survive the uncertainty.

The Deloitte CFO Survey, which measures confidence among finance directors at major British companies, recorded a collapse in sentiment to a net figure of minus 57% in late March. That is the most pessimistic reading since the height of the COVID-19 pandemic.

Consumers are pulling back

Ordinary households are responding to the situation predictably. When things feel financially uncertain and prices are rising, people spend less. Consumer confidence, as measured by the Deloitte Consumer Tracker, fell to minus 14.1% in the first quarter of 2026, its lowest level since 2023.

Spending power is expected to fall by 0.3% across the year for the average household. People are cutting back on things they do not consider essential. Travel has taken a particularly sharp hit. Spending on travel fell by 3.3% in March 2026, the first such decline recorded by Barclays in five years.

Jet fuel prices have more than doubled since the conflict began, and airlines are passing those costs on to passengers. International holidays are being postponed. People are choosing domestic breaks instead, or simply staying home.

The hospitality sector, which was already struggling with the April 2026 increase in the minimum wage and higher business rates, is now facing what industry figures are calling a summer of shortages. Breweries are worried about carbon dioxide availability ahead of the football World Cup in June, usually one of the most commercially important periods in the calendar.

What the government is doing

Chancellor Rachel Reeves has been walking a difficult line. On one side, there is enormous pressure to protect households and businesses from rising costs. On the other hand, the government is painfully aware that uncontrolled spending could damage Britain’s fiscal reputation and push up borrowing costs, as happened during the 2022 mini-budget crisis.

“This is not our war, but it is pushing up bills for families and businesses. That’s why it’s my number one priority to keep costs down… Obviously, no sensible person is a supporter of the Iranian regime, but to start a conflict without being clear what the objectives are… I do think that is a folly and it is one that is affecting families here in the UK,” The Chancellor said.

The approach taken has been cautious and targeted. Rather than offering blanket support to everyone, the government has focused on the most vulnerable. It has extended the existing 5 pence cut in fuel duty, saving the average driver around 90 pounds per year. It is also working on contingency plans for further energy bill support in the autumn, when demand for gas heating typically rises sharply.

To fund these measures, the government has expanded the windfall tax on electricity generators. Companies that generate electricity from gas-linked sources are currently making exceptional profits because of how electricity pricing works in the UK market.

The government has raised the Electricity Generator Levy from 45% to 55%, capturing more of those windfall profits and redirecting them toward household support. This levy has also been extended beyond its original 2028 end date.

The government has explicitly said it cannot absorb every price rise on behalf of the population. It is a difficult message to deliver, but it reflects the reality that with national debt on track to reach 100% of GDP by 2029, the room for large unplanned spending is very limited.

Internationally, Reeves has been vocal in criticising the war itself. She has called it a mistake and a folly, language that puts her at odds with US Treasury Secretary Scott Bessent, who has defended the conflict as a necessary cost for long-term global security.

Reeves led a joint statement signed by finance ministers from 11 countries, including Japan, Australia, Spain, and the Netherlands, calling for a negotiated resolution and the reopening of the Strait of Hormuz. The diplomatic tension with Washington adds another layer of uncertainty to the UK’s economic relationships.

BoE is stuck

Normally, when inflation rises sharply, a central bank’s response is to raise interest rates. Higher rates make borrowing more expensive, which cools spending and helps bring prices down. But the Bank of England (BoE) is in an unusual bind.

Before the Iran conflict, financial markets expected the Bank to start cutting its main interest rate in April 2026, as inflation had been falling toward the 2% target. Now, with inflation at 3.3% and rising, those cuts have been shelved. But the Bank is not raising rates either.

The reason is that the economy is simultaneously weakening. Raising rates aggressively into a slowing economy risks causing a deeper recession. The Monetary Policy Committee has held the rate at 3.75% and is expected to keep it there for some time.

Economists describe this as an unenviable balancing act. If the Bank holds firm, inflation may become entrenched, especially if workers begin demanding higher wages to keep up with rising petrol and food costs. If it cuts rates, it risks fueling inflation further. The most likely outcome, according to analysts, is that rates stay on hold until around mid-2027, when inflation is expected to gradually return closer to target.

For homeowners approaching the end of fixed-rate mortgage deals, this is unwelcome news. Over a million British households are expected to face higher mortgage payments in the coming months as their fixed deals expire, adding to the broader pressure on household budgets.

Industry under pressure

Some of the starkest stories from the current crisis involve British manufacturers. Energy-intensive industries (those that need enormous amounts of gas or electricity to operate) are in genuine difficulty. Steel, chemicals, glass, ceramics, cement, and paper are all facing input cost increases that many cannot absorb or pass on.

The British Plastics Federation has reported that 58% of its member companies are experiencing severe or significant operational impacts. Almost all of its members are reporting rising raw material and energy costs.

Some firms have added surcharges of up to 30% to their prices, which risks sending customers to overseas competitors, particularly American ones, who benefit from access to cheap domestic natural gas and are insulated from the Hormuz disruption.

The construction sector is also struggling. Output had already fallen by 2% in the three months to February 2026, with private housebuilding dropping 6.5%. The conflict has made things worse through supply chain delays and surging material costs.

Bricks, cement, asphalt, and insulation are all more expensive to produce when energy costs are this high. Construction experts have warned that many projects are moving from commercially challenging to commercially unviable.

One of the most unexpected consequences involves renewable energy. Two major offshore wind projects off the Norfolk coast are facing delays because key components, specifically steel turbine foundations and offshore substations, were ordered from suppliers in the UAE. Those components cannot currently be shipped through the Strait of Hormuz. The conflict that is driving demand for cleaner energy is simultaneously delaying the infrastructure needed to deliver it.

Where things stand

Growth has stalled. Inflation is rising. Jobs are being lost. Businesses are pulling back. Consumers are cutting spending. And the root cause of all of it, the blockade of a narrow waterway seven thousand kilometres away, shows no immediate sign of resolution.

What makes the situation particularly difficult is that even a ceasefire would not instantly fix things. Energy infrastructure that has been damaged takes time to rebuild. Supply chains that have been disrupted take months to restore. And business confidence, once lost, is slow to return.

Britain’s vulnerability at this moment reflects structural issues that existed long before the conflict began. The country is too dependent on imported energy. Its gas storage is inadequate. Its industrial base has been gradually hollowing out for decades. The current crisis has exposed all of that with uncomfortable clarity.

The months ahead will be tough, particularly for lower-income households, energy-intensive industries, and anyone whose livelihood depends on consumer spending. The government and the Bank of England are trying to prevent the worst outcomes. But the margin for error is small, and the decisions being made in Washington, Tehran, and on the waters of the Persian Gulf will matter as much as anything decided in Downing Street or Threadneedle Street.

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As the 2026 midterm elections approach, all three of those pledges are far from being fulfilled, and the reason is a collision between two of his own decisions. First is the decision to strike Iran, and the second is taxing imports at the highest rate in more than a century.

The consequences are showing up where voters feel them most directly, at the gas pump, in the grocery aisle, and at car dealerships. Surveys show consumer confidence at record lows. If the pain persists into November, Donald Trump’s Republicans could face a serious reckoning at the ballot box.

A war that reignited inflation

In late February, Donald Trump ordered joint US-Israeli strikes on Iran. Tehran swiftly responded by closing the Strait of Hormuz, the narrow channel in the Persian Gulf through which roughly a fifth of the world’s oil supply passes daily. That one decision triggered an enormous energy price shock that economists say has reversed much of the hard-won progress the United States made on inflation during 2024 and 2025.

Brent crude, the global oil benchmark, surged from about $70 per barrel before the conflict to over $110 at its peak after Iran shut the strait. When Tehran briefly signalled a partial reopening, prices fell below $90, only to climb back above $105 as tensions remained high. The US benchmark, WTI crude, approached $96. As a direct result, US inflation accelerated to 3.3% in March 2026, the highest rate in two years, driven largely by fuel.

The OECD now warns that US headline inflation could hit approximately 4.2% in 2026, up from a previous forecast of just 3%.

The IMF’s managing director, Kristalina Georgieva, has described the situation as a “reversal” of what had been a positive trajectory for prices. Simply put, two years of painful interest-rate increases to bring inflation under control have been significantly set back in a matter of weeks.

Gas prices as political poison

Since the Iran strikes began, pump prices across the United States have risen by roughly 50 cents per gallon, with station price boards changing numbers almost daily in some areas. In California, the average has already crossed five dollars per gallon.

Nationally, analysts expect average US gasoline prices to head toward three dollars fifty if oil stays above $100. The national average was already at $4.16 per gallon on April 8, up from $3.25 just a month earlier, according to AAA data.

Polling shows that voters are angry and anxious. A Reuters/Ipsos survey in early March found that 67% of Americans expect gas prices to get worse over the next year as a result of the Iran campaign.

That fear cuts across party lines. Over 44% of Republicans and 85% of Democrats share it. Only 29% of respondents approved of the strikes at all, and 64% said Trump had never clearly explained what the United States was trying to achieve.

A separate Pew Research survey later in March found that 69% of Americans were worried about rising fuel costs from the conflict. Nearly six in ten Republicans told Pew that gas prices were their biggest concern about the war, while close to eight in ten Democrats said the same.

That bipartisan pain matters enormously heading into November. When a President’s own supporters feel the squeeze at the pump every time they fill their tank, the political shelter that wartime solidarity usually offers starts to crack. Inflation, unlike foreign policy abstractions, is something voters experience personally and remember when they vote.

More than petrol

The disruption to the Strait of Hormuz has inflicted damage well beyond fuel prices. Oil is a raw material for plastics, fertilisers and chemicals, so when its price spikes, the cost of hundreds of everyday products rises in turn. Shipping routes have been disrupted, adding delays and costs throughout global supply chains.

Researchers at the Dallas Federal Reserve modelled the inflation impact depending on how long Hormuz stays restricted. If it remains closed for one quarter, it adds roughly 0.35 percentage points to 2026 inflation.

Two quarters of closure add 0.79 percentage points. Three-quarters would add approximately 1.47 percentage points on top of existing pressures. These figures translate directly into higher prices on goods ranging from groceries to building materials, even if the war itself ends.

OECD economists also note that because of the way prices ripple through supply chains, households will still be feeling the effects in rent, transport costs and consumer goods as they head to the polls in November.

The tariff tax

The Iran shock is not arriving in a vacuum. It is hitting on top of a separate cost increase that Donald Trump himself created. Namely, his sweeping tariff programme, which has imposed taxes on imported goods at levels the United States has not seen in over a hundred years.

When Trump’s second term began, the average effective tariff rate, the actual percentage tax paid on imports, stood at roughly 2.5%. By April 2025, it had jumped to an estimated 27%, the highest in more than a century.

Legal challenges and negotiated deals have since brought it down to approximately 11.8% as of early 2026, with CNN tracking the effective rate at around 16.8% by the end of 2026.

Even at those reduced levels, the tax burden on imported goods is vastly higher than anything Americans faced before Trump’s second term. Initially, companies absorbed most of the extra costs rather than passing them on to shoppers.

In 2025, the US government collected roughly $187 billion more in tariff revenue than in 2024, almost a 200% increase, and businesses covered an estimated 80% of those costs internally. But that cushion is being depleted.

JPMorgan analysts and industry consultants warn that the corporate share of these costs could fall to around 20% in 2026 as pre-tariff stockpiles run out and businesses begin repricing. The bill is now migrating to household budgets.

What does it cost a family

Research by the Centre for American Progress, drawing on Harvard Business School analysis, found that between October 2024 and March 2025, prices of everyday nondurable goods such as cleaning products and toilet paper rose approximately 5%.

Furnishings climbed around 8%. Clothing jumped roughly 14%. A Yale Budget Lab estimate puts the ultimate annual cost to the average US household at approximately $1,700 once tariffs are fully passed through.

Food is now entering the pressure zone as well. Tariff effects typically take 12 to 18 months to work through to consumer prices fully, meaning peak pressure will fall between April and October 2026, right in the heart of election season.

Food prices were already up 2.9% year-on-year in January 2026. Yale’s modelling implies an effective annual food cost increase of around $1,500 for a typical household once tariff effects are fully felt. Combined with higher fuel bills, those numbers become punishing for families already stretched thin after years of post-pandemic inflation.

The sharpest tariff increases fall on metals, vehicles, electrical equipment and computers, raising the cost of cars, appliances and new home construction. Consumer goods with thin margins and heavy import dependence, such as coffee and fresh produce, have seen particularly sharp price swings.

For a middle-income family, the combined effect feels less like an America-first economic strategy and more like being squeezed from every direction at once.

Collapsing confidence

The University of Michigan’s Index of Consumer Sentiment, one of the most closely watched measures of how Americans feel about the economy, fell to a record low in April 2026. The US dollar has also weakened to its lowest point in four years.

While a weaker dollar helps American exporters, it also makes imported goods more expensive, piling onto the inflation already generated by tariffs and the energy shock. JPMorgan Chase chief executive Jamie Dimon, writing in his annual shareholder letter on April 6, laid out the compounding risk in stark terms.

“Now, because of the war in Iran, we additionally face the potential for significant ongoing oil and commodity price shocks, along with the reshaping of global supply chains, which may lead to stickier inflation and ultimately higher interest rates than markets currently expect,” said the document.

Donald Trump’s standing on the Iran conflict itself remains fragile. The same Reuters/Ipsos poll showing only 29% approval for the strikes found that roughly two-thirds of respondents felt the administration had never given a clear picture of what military victory was supposed to look like. When people see their purchasing power shrinking without a clear benefit to offset that sacrifice, frustration tends to find expression in protest votes, especially in the tightly contested districts that decide control of Congress.

Running out of road

Donald Trump could still seek a diplomatic de-escalation with Iran, but after framing the military campaign as a defining test of American resolve, any visible retreat risks being labelled as capitulation.

He could roll back tariffs to ease household budgets, but that would contradict a central pillar of his economic philosophy and anger the constituencies that have benefited from protection.

The White House has already quietly delayed planned tariffs on some furniture and Italian pasta in early 2026, a move analysts read as political damage control rather than principled policy. Wall Street has coined the nickname “TO,” standing for “Totally Chicken Out,” for the administration’s pattern of pulling back from tariff threats whenever markets or polls react badly, suggesting investors see trade policy as more performative than strategic.

Piecemeal retreats like these, however, may not be sufficient to change how voters feel about their household bills by November.

The Dallas Fed’s research suggests that even a relatively brief Hormuz disruption will keep inflation elevated through the end of 2026. The 12-to-18-month lag for tariff pass-through means price pressures will be near their peak immediately before Election Day.

Independent analysts estimate that Donald Trump’s combined policies will cost typical households between $1,500 and $1,700 per year. Consumer sentiment is already at a record low. Neither has the conflict toppled Iran’s leadership, nor has it delivered the concessions the White House sought.

However, the combined arithmetic of oil shocks and tariff costs is already eroding Trump’s standing at home, and as November approaches, his most dangerous political adversary may not be a foreign one, but the monthly household budget.

The post Trump’s war, tariffs squeeze American wallets appeared first on International Finance.

The core problem is a combination of rising energy costs and shaky consumer confidence. Oil prices have surged to an average of $103 per barrel, while natural gas, which powers homes and factories across Europe, is trading at €55 per megawatt-hour. These are not abstract numbers. When energy gets expensive, it costs more to produce goods, transport them, and heat homes. Businesses hold back on investment. Families spend less. That chain reaction is precisely what Italy is experiencing right now.

Consumer price inflation, the rate at which everyday prices rise, is expected to hit 2.6% this year as a direct result of these commodity spikes. To put that in plain terms, goods and services that cost €100 last year will cost around €102.60 this year. The bank projects inflation will ease below 2% by 2027 and 2028, provided that energy prices gradually fall as futures markets currently suggest.

Geopolitical instability, particularly the ongoing conflict in the Middle East, adds another layer of risk. In a worst-case scenario where hostilities drag on, Italy’s 2026 growth could shrink by a further 0.5 percentage points, and 2027 could lose a full percentage point off its forecast, a significant blow to an already fragile recovery.

There are some bright spots. The labour market remains relatively stable, wages are growing, and the bank expects a slow recovery to begin in early 2027 once inflationary pressure eases. However, Italian manufacturers face stiffening competition from cheaper Chinese goods, which limits their ability to grow.

The Banca d’Italia is urging policymakers to pursue productivity reforms and keep a close watch on global risks before conditions worsen further.

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