06/02/2026
The surprise bombing of Iran, followed by predictable retaliatory strikes across neighboring Middle Eastern countries and the blockade of the Strait of Hormuz, has sent energy prices sharply higher. Overnight, crude oil surged from roughly $65 per barrel to well above $100, while U.S. gasoline prices jumped from under $3 per gallon to $4.50.
While some argue the economic impact will remain largely confined to the energy complex, history suggests otherwise. Rising energy costs tend to ripple throughout the economy, increasing expenses for manufacturing, transportation, construction, and a wide range of services.
At the same time, the Federal Reserve’s preferred inflation measure is already running well above target and continues to rise — conditions that would normally argue for higher interest rates, not lower ones. But the Fed faces a difficult balancing act. Despite mounting supply-side inflationary pressures, the domestic economy remains fragile due to persistent economic uncertainty, ongoing trade tensions, and an increasingly cautious consumer.
More on this in a follow-up post.
