Iran war hangs over Trump’s China trip: Analysis
As President Donald Trump prepares to travel to China for critical talks with the leader of the No. 2 global power, it is clear that the political and economic damage caused by the Iran war cannot be easily left behind. Even if a deal is reached tomorrow to get oil tankers moving again — and there is little sign of it — Americans will face new inflation concerns for months or longer.
The question now is not whether Trump honorably secures his war objectives. What matters is whether his presidency can survive the heavy blow of the war.
Trump gets little political goodwill from the stock market, which is constantly setting new records. S&P 500 It has risen 7.3% since February 27, just before the US and Israel attacked Iran. Meanwhile, Trump’s net approval rating has fallen to the lowest level of his two terms, according to CNBC’s All-America Economic Survey.
Stocks are rising on faith in artificial intelligence and on investors’ justified belief that Trump will find a way to avoid major economic risks. But the market is fragile and could collapse if the disruption continues, JPMorgan analysts wrote in a note to clients Monday.
“A temporary shock, even a major shock, can be absorbed. A long-term disruption cannot be absorbed,” analysts wrote.
Analysts conclude that Iran or the United States will back down by June because the mounting damage is so serious. That’s a reasonable bet for a Wall Street firm to make, given Trump’s apparent decisions to push back on tariffs and Greenland threats, for example.
But the decision that the pain will become so intense that one side will be forced to back down will have dire consequences for Americans already struggling to pay at the pump — not to mention Trump’s political stance.
Given the extent of the supply disruption, oil prices are – counterintuitively – relatively low at the moment. Global benchmark Brent Crude oil futures reached $104 a barrel on Monday, up 44% since the start of the war but still below the peaks set by Russia’s 2022 invasion of Ukraine.
The cost of a gallon of gasoline in the United States on Tuesday averaged $4.50, up 44% from last May. Diesel increased by 61 percent.
Iran has closed the Strait of Hormuz, the narrow passage through which tankers must pass to reach the Persian Gulf, where they can refuel Saudi Arabia and other Middle Eastern energy giants. The closure means that one-fifth of the world’s oil supplies cannot pass through normal routes.
These countries have taken great steps to get oil moving again. But Amin Nasser, CEO of Saudi Aramco, the world’s largest oil producer, said in an earnings call Monday that there was only so much they could do.
“If current cuts continue at this rate, the market will lose approximately 100 million barrels of oil for every week the Strait of Hormuz remains closed,” Nasser said.
Countries have been able to tap into existing oil stocks to keep their economies stocked with refined products such as gasoline and jet fuel. But these stocks could be “critically low” by this summer, Nasser said.
Nasser said, “If the Strait of Hormuz opens today, it will take months for the market to rebalance. If its opening is postponed for a few more weeks, normalization will last until 2027.”
This does not take into account the time it will take to clear any mines Iran may have left in the strait, the official said.
Iranian Ambassador to China Reza Rahmani Fazli Tuesday’s post on X He pressed Tehran’s case with Beijing, saying the relationship between the two countries was too strong for the United States to handle.
As a result, higher energy prices are expected for the foreseeable future. The price of crude oil accounts for about half of this figure. cost of a gallon of gasolineAccording to the Energy Information Administration.
And the US elections are less than six months away. The 2026 midterm elections will be a crucial referendum for Trump and the Republican Party as they try to keep control of both houses of Congress.
State and federal taxes account for another 18% of gas prices; Which is why Trump is pushing for a federal gas tax holiday. Pausing the tax would likely require action by Congress and, if successful, could deal a blow to Americans in other ways. The debt stock this month surpassed the psychological threshold of 100% of gross domestic product, with the U.S. Treasury predicting the government will borrow $2 trillion next year to finance the deficit. Plus, gas taxes primarily fund highway maintenance, and any local politician can tell the president that potholes are politically unpopular.
Cutting taxes as debt mounts in the midst of a costly war would likely weigh on long-term Treasury yields. 10 year Treasury The rating rose to 4.4% on Tuesday. This is the benchmark for most consumer debt, and higher 10-year means more expensive rates for mortgages, car loans and credit cards. The rising 10-year also threatens the stock market because it offers investors a way to get risk-free returns from the government.
In other words, there is little Trump can do in the short term to escape the economic distress created by the Iran war. This will be inevitable for Republicans in the midterm elections and will color every choice Trump makes going forward.
All of this will form the backdrop to Trump’s talks with Chinese leader Xi Jinping after Air Force One lands on Wednesday. Xi has his own problems, but public opinion suffers much less under the dictatorship than in the US. If Trump asks for help ending the Iran war, Xi could pay a big price.
Or maybe Xi will sit back and watch the economic turmoil grow. But Trump appears to be helping to highlight the reality that, in an increasingly zero-sum world, the United States will pay the price for the Iran war, one way or another.
