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By Hugh Cameron
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Only a few days into “Operation Epic Fury”—the bid to, in the White House’s words, “eliminate the threat of the Iranian regime once and for all”—the fallout is already spilling far beyond the theater of conflict in Western Asia.
The strikes, which took out Iran’s chief cleric and supreme leader, Ayatollah Ali Khamenei, sparked a multipronged retaliation strategy from Tehran, which is currently attempting to throttle shipments traveling through the Hormuz Strait while launching its own strikes against military and economic targets across the Gulf region.
And although in its infancy, emerging data shows the conflict is already reverberating at home for U.S. consumers, with higher pump prices, climbing borrowing costs and rising inflation expectations among the early domestic pressures from President Donald Trump’s latest geopolitical gambit.
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Gas Prices
As experts warned would be the case shortly after the strikes—which the administration too has now acknowledged—the attacks and Iran’s retaliation promise to disrupt supply routes and curb oil production, echoing the conditions which took hold following Russia’s invasion of Ukraine.
Brent crude has inched above $80 per barrel several times in recent days, and some analysts believe prices could pass “well over” the $100 benchmark last seen in 2022 if Tehran’s current blockade in the Hormuz Strait does not subside. Producers across the Gulf, including Saudi Aramco and QatarEnergy, have also paused production in anticipation of and following repeated Iranian drone attacks, further exacerbating this squeeze.
Experts told Newsweek previously that retail costs tend to trail crude by a few days, and GasBuddy data shows that these effects may now be reaching American pumps. Average gas prices have spiked to their highest level since September.
And while the U.S. has not yet announced plans to tap its own oil reserves to contain the increases, the administration is confident that these will not be catastrophic.
“This was a well telegraphed geopolitical event,” Treasury Secretary Scott Bessent told CNBC on Wednesday morning. “The crude market had already moved substantially over the past two months...the crude markets are very well supplied.”
The Stock Market
The coordinated strikes by Israel and the U.S. sparked significant uncertainty about how markets would react, with a notable sell-off erasing some of the recent gains in American indexes when trading resumed on Monday morning.
Stocks recouped some of these losses following two volatile sessions, buoyed in part by reports of Iran engaging in back-channel negotiations with the U.S., and the overall reaction was more subdued than some might have feared.
Goldman Sachs Chairman and CEO David Solomon said he was “surprised” by the “benign” response to the weekend’s developments, and told attendees at a recent summit it would likely “take a couple of weeks for markets to really digest the implications of what’s happened both in the short term or in the medium term.”
Inflation Expectations
With the already-evident impact on oil prices, which past conflicts have shown to raise costs across the board, the conflict’s escalation has left inflation forecasts unanchored for the time being.
According to one analysis from Goldman Sachs, economic risks are now “skewed to the upside,” and a sustained 10-percent increase in oil prices is forecast to raise both the core Consumer Price Index (CPI) and the Personal Consumption Expenditures (PCE) index by four basis points. Headline figures, including the volatile food and energy categories, are rising even more.
Goldman Sachs said that if the current rally in oil prices continues, this would drive its May headline CPI projection up from 2.7 percent year-over-year to 3.0 percent, while lowering the odds of the retreat it had originally forecast for later in 2026.
Speaking to CNBC on Monday, JPMorgan CEO Jamie Dimon said that the conflict could drive up prices, but that “if it’s not prolonged, it’s not going to be a major inflationary hit.”
"If it went on for a long time, that would be different," he added.
Interest Rates
"There is no economic upside to any of this, as the higher oil prices will weigh on growth and push inflation higher," Mark Zandi, chief economist at Moody's Analytics, told Newsweek earlier this week. "This will, in turn, heighten Americans' affordability concerns and complicate the conduct of monetary policy, as the Fed will be unsure whether to respond to the weaker growth by lowering rates or to the higher inflation by raising rates."
Reflecting expectations of the conflict’s inflationary effects, the odds of the Federal Reserve cutting rates at its upcoming policy meetings have shifted considerably since Saturday’s strikes and Iran’s subsequent retaliation.
According to the CME FedWatch tool, traders have trimmed their already-low expectations of a cut when the Open Market Committee convenes later this month, and the share forecasting that the central bank will hold rates steady for longer has increased for the remainder of 2026.
Meanwhile, on Kalshi, the odds of the Fed enacting zero-rate cuts this year—even with Trump’s replacement for Chair Jerome Powell at the helm—have surged to around 21 percent from roughly 13 percent prior to the strikes.
Borrowing Costs
By simultaneously raising inflation expectations and dampening hopes of a rate cut, the weekend’s events appear to have driven a sharp rebound in borrowing costs.
The yield on 10-year Treasury notes—the benchmark lenders use when setting rates on everything from mortgages and corporate bonds to car loans and credit cards—saw their biggest one-day jump since June on Monday, The Wall Street Journal reports.
On the heels of this increase, mortgage rates are once again on the rise, a setback for prospective homebuyers in the U.S. who would have hoped that last week’s brief dip below 6 percent, the first since 2022, would carry into the spring housing season.
The data captures only the early reactions to what the administration is previewing as a lengthy military operation.
Speaking at the White House on Monday, Trump said that he anticipates Operation Epic Fury lasting “four to five weeks,” but said that the U.S. has “capability to go far longer than that.”
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