The U.S. war on Iran has upended energy markets and gut-punched the global economy, especially countries in Asia, the Middle East, Africa, and Europe. But the United States is not nearly as immune to the economic fallout from the war as U.S. President Donald Trump seems to think—and it is starting to show.

There is a whole slew of economic indicators flashing “check engine” across the dashboard of the U.S. economy that show that the prolonged war in the Middle East is reigniting inflation, fouling supply chains, and dampening hopes of a tax-cut-fueled growth spurt this year.

The U.S. war on Iran has upended energy markets and gut-punched the global economy, especially countries in Asia, the Middle East, Africa, and Europe. But the United States is not nearly as immune to the economic fallout from the war as U.S. President Donald Trump seems to think—and it is starting to show.

There is a whole slew of economic indicators flashing “check engine” across the dashboard of the U.S. economy that show that the prolonged war in the Middle East is reigniting inflation, fouling supply chains, and dampening hopes of a tax-cut-fueled growth spurt this year.

Those economic headwinds are one reason that Iran is sticking to its guns in talks with the United States to end the war. They are also one reason Democrats are increasingly confident that they will recapture at least one chamber in this year’s midterm elections.

Despite Trump saying earlier this month that he doesn’t “think about Americans’ financial situation” when negotiating with Iran, he clearly does, because the economic pressure that Tehran has exerted through its de factocontrol of one of the world’s most important waterways has had knock-on effects that are only now being truly felt, both for the U.S. consumer and for the U.S. strategist, if there is one.

Where to begin? The yields on long-term U.S. debt are as good a place as any, because they point to the through line of everything that is hurting, and will continue to haunt, the U.S. economy: rising prices and sticky inflation. The yield on 10-year U.S. Treasury bonds—a simple, much-coveted financial instrument that serves as a proxy for the kind of interest rate a regular person might pay for a mortgage or a car loan—keeps climbing, to above 4.6 percent. That means that investors are giving a little bit of side-eye to the world’s safest financial asset. 

The yields on 30-year bonds paint an even darker picture, with yields above 5 percent and professional money managers expecting even higher returns before long. Arcane-sounding things like “bond yields” translate in everyday terms to “we’re not entirely sure about betting on you,” which is a referendum of sorts on the way things are headed.

Bond investors do have a point: Inflation has come back, with a year-on-year price rise of 3.8 percent, according to the latest numbers. That’s not great, after a presidential election heavily impacted by the price of eggs. But while food price increases were relatively restrained (3.18 percent), the real elephant in the room is the soaring cost of energy (up 18 percent year on year.)

That is happening because one-fifth of the world’s oil and natural gas was taken out of circulation with the U.S. war of choice on Iran, which led to the prolonged closure of the Strait of Hormuz, a bottleneck that has yet to be fully opened. 

One year ago, regular gasoline prices in the United States were $3.17 a gallon on average; today, the national average is $4.55. The situation for diesel is even worse, since it powers not only oversized pickups but also the tractor trailers and tractors that do the actual heavy lifting in the economy: National average prices have soared some 60 percent from $3.54 a gallon one year ago to $5.65 today.

The blame for that falls largely on the spike in the cost of crude oil (there are some refining particularities, especially on the West Coast, that aggravate the situation). The price of U.S. benchmark crude oil, West Texas Intermediate, was $58 a barrel as recently as December. Today, it trades at around $100 a barrel. Oil prices are up because the war in the Middle East has disrupted everything, and will continue to do so, for months after any resolution to the conflict.

The thing about energy prices is that they trickle down and affect everything in the economy, from the cost of eggs and airfares to the very availability of wheat. Here’s what the Federal Reserve’s latest Beige Book, a quarterly check-in on the U.S. economy, had to say about these rising prices: “Energy and fuel costs rose sharply in all districts, attributed to the Middle East conflict, leading to higher freight and shipping costs and higher prices for plastics, fertilizers, and other petroleum-based products,” it noted.

But the pressure points on the U.S. economy aren’t just energy-related, as the Beige Book also noted. Trump’s continued use of tariffs on global imports, especially on the metals used throughout the economy, continue to weigh heavily.

“Input cost pressures beyond energy-related increases were also widespread. Several districts reported rising prices for metals due to tariffs, such as steel, copper, and aluminum,” the Federal Reserve wrote. (It’s right: Prices for steel, copper, aluminum, and fertilizer are going vertical.)

That is already creating a future migraine for incoming Federal Reserve chair Kevin Warsh, who was handpicked by Trump to slash interest rates but who now faces an economy with stable employment and rising prices. The expectation now is that instead of cutting interest rates this summer, the Fed will have to stand pat, and may even have to raise rates later this year to keep inflation in check. Higher interest rates tend to dampen consumer spending and business investment.

Even the seeming bright spots in the U.S. economy are actually blights. The main manufacturing index, the Purchasing Managers’ Index, showed a big uptick in the last few months, with companies making more stuff, buying more stuff, and stocking their warehouses. That may sound positive, but most economists see it as a classic case of front-loading, as firms try to get in front of even higher prices later on as fears of cascading supply-chain disruptions from the Iran war intensify. (“The surge in manufacturing activity in April is not the cause for cheer that at first glance it suggests,” wrote S&P’s chief business economist.)

The cracks in the U.S. economy are starting to show, after a lacklusterend to 2025. The irony is that both of the main causes for higher prices and stiffer headwinds are self-inflicted: the war in Iran, and the continued reliance on tariffs. 

That could have an impact in this fall’s midterm elections, potentially helping Democrats recapture the House of Representatives on a wave of disapproval of Trump’s handling of the economy. But it is also already having an impact on U.S. foreign policy, in the sense that Trump, or his team, knows that the United States does not hold all the cards in the standoff with Iran.