How the war with Iran and its economic consequences could affect Donald Trump's political position
The war with Iran is deeply unpopular with Americans, and rising oil prices could lead to long-term price increases for US consumers.
US President Donald Trump/PHOTO: AFP
President Donald Trump remains confident in his foreign strategy, especially after the capture of Venezuelan leader Nicolás Maduro. According to reports, this operation would have given Washington increased control over Venezuela's energy and mineral resources, but also a tool to pressure the Cuban government, which could limit its access to energy.
Trump seems convinced that the military operation carried out together with Israel against Iran will have a similar result. Iran's missile and drone attacks on Israel and some Arab states do not seem to have changed its belief that the United States can win the conflict, regardless of how victory is defined, The Guardian writes.
The president suggested on social media that the impact on energy markets would be limited. “Short-term oil prices, which will fall rapidly after the Iranian nuclear threat is destroyed, is a very small price to pay for the security and peace of the United States and the world,” he wrote, adding that “only fools would think otherwise.”
Trump's confidence is also fueled by the fact that his controversial economic policies have so far not caused as severe an economic fallout as some economists anticipated. Despite expanded trade tariffs, cuts to the federal government, the deportation of some immigrant workers and repeated criticism of the Federal Reserve, some analysts recently suggested that the US economy could make a “soft landing” after a period of high inflation.
The United States is also among the developed economies best protected against a spike in energy prices. Oil imports have fallen significantly over the past two decades as domestic production has increased. At the same time, natural gas has become a more important component of the energy mix.
Oil now covers about 38% of US energy consumption, nearly 10 percentage points less than during the 1973 oil crisis, when Arab states suspended exports to Washington over support for Israel during the Yom Kippur War. Meanwhile, the share of natural gas has increased from around 30% to 36%.
European markets reacted strongly when Iran restricted traffic through the Strait of Hormuz, through which about 20 percent of global oil traffic passes, and concerns also grew after Qatar suspended the operation of some liquefied natural gas facilities. In the United States, however, the S&P 500 stock index, an indicator frequently invoked by Trump, is holding close to record levels.
What could go wrong
However, analysts say the president could face difficulties politically. Not because of a military defeat to Iran, but because of public opposition to the war.
Unprecedented anti-American attitudes, virulent condemnations at the level of states and international organizations. Romania looks elsewhere
The conflict with Iran has been unpopular from the start, unusual in a country where public opinion often tends to support military interventions. In addition, the economic consequences of the conflict could accentuate this discontent.
Although the US produces much of the energy it consumes, the US economy is not completely insulated from global market developments. The price of oil is set on international markets, whether it comes from Texas or the Middle East.
The price of gasoline in the US has already exceeded $3.50 a gallon — the highest level since the beginning of Trump's term. Government estimates indicate that prices may not return to 2025 levels until autumn 2027, while diesel could remain more expensive until at least the end of next year.
Higher fuel costs could have ripple effects in the economy
Trucking companies could pass on the extra costs to customers, farmers could raise food prices to offset higher fuel and fertilizer spending, and airlines and retailers could be hit in turn.
These developments could also influence the inflation rate. Annual inflation was 2.4% in February, but rising energy costs could prevent the Federal Reserve from cutting interest rates in the coming period.
At the same time, more expensive fuel could hurt sales of large vehicles, such as SUVs, favored by many Americans.
The Trump administration is trying to limit the impact on the energy market. The authorities have proposed, among other things, escorting oil tankers through the Strait of Hormuz, easing some sanctions on Russian oil exports and looking at ways to increase production in Venezuela.
However, analysts say reversing an oil price rise of this magnitude could be difficult without a major shift in the conflict. Either the war must end or Iran's ability to threaten oil shipments must be significantly reduced.
Trump has suggested in public statements that he could get Tehran's “unconditional surrender” while saying the war is “almost completely over.” But some experts warn that destroying a country's military infrastructure does not guarantee winning the conflict in the long term.
The president could choose to scale back claims of Iran's surrender and declare victory on other grounds by withdrawing US forces. Another option would be to deploy ground troops or continue the bombing.
None of these options promise a quick fix, however, and the economic impact of the war could linger. For Trump, analysts say, the lesson may be that the success of one-off operations does not guarantee similar results in a much more complex conflict.
