The conflict in Iran has driven global oil prices higher and pushed U.S. gas prices to $4.15 a gallon, up from just under $3 before the fighting began this year, directly stretching the budgets of lower- and middle-income households. This surge in energy costs arrives as U.S. consumer prices rose 3.3% in March this year from a year earlier, marking the biggest yearly increase since May 2024 and further eroding the purchasing power of workers.
The war has left the Middle East unsettled, straining alliances and shifting the balance of economic and military power. The U.S. and Iran are preparing for talks this weekend in Pakistan, even as the conflict continues to reverberate globally during a tenuous ceasefire.
Who Profits
The conflict has largely shut down the flow of ships through the Strait of Hormuz, a waterway through which about one-fifth of the world’s oil travels. Iran’s paramilitary Revolutionary Guard has used threats of sea mines and possible attacks to keep the Strait effectively closed, granting Iran new economic leverage despite its own battered state. This closure has damaged oil and gas production facilities across the Middle East, further contributing to the global rise in oil prices. Brent crude oil, the international standard, surged from roughly $70 per barrel before the war in late February this year to over $119 at times, settling at $96.58 on Friday. Gulf Arab states, despite pleading to be left out of the conflict, found themselves targeted by Iranian drone and missile fire, forcing them to close refineries or declare inability to meet promised oil output. Even with a ceasefire, Iran's control of the Strait of Hormuz by threat alone means Gulf states cannot get their energy shipments to market.
Who Pays
While energy capital accumulates, the working class bears the cost. Higher gas costs reduce Americans’ ability to spend on other goods and services, slowing the economy and worsening unemployment. The war has done the opposite of what President Donald Trump promised, raising gas prices, leaving stock markets reeling, and sending shockwaves through the economy as the labor market weakens and inflation begins rising anew. In Iran, the country was battered by nationwide protests in January this year and heavy airstrikes during the war, with its military sites in ruins and missile arsenal depleted. The destruction in Iran’s oil and gas industry, along with attacks targeting steel mills and other economic sites, could spur further unrest among its people. In Lebanon, the regional war has taken a devastating toll, displacing more than a million people and killing nearly 1,900 in the ongoing Israel-Hezbollah conflict. Israelis also grew tired of the war, as nonstop air-raid sirens disrupted daily life and sent people scrambling into bomb shelters around the clock. Polling shows that most Americans believe U.S. military action in Iran went too far, causing a rift within Trump’s political base.
The State's Role
The U.S. and Israel will hold elections this year, with their leaders facing voters after falling short of their war aims. Israeli Prime Minister Benjamin Netanyahu, who set ambitious goals at the outset of fighting on Feb. 28 this year, including removing threats from Iran’s missile and nuclear programs and fostering a popular uprising, acknowledged "we still have goals to complete" after the ceasefire. He claimed "immense achievements," stating, "Iran is weaker than ever, and Israel is stronger than ever." Netanyahu hopes the U.S. will solidify battlefield gains into a permanent agreement that guards Israel’s interests, while also maintaining his relationship with President Trump.
Trump, for his part, has repeatedly tested the 32-member NATO alliance, cutting off direct U.S. military assistance to Ukraine, threatening to take Greenland from Denmark, and pressuring members to increase defense spending. He derided allies as "cowards," slammed NATO as "a paper tiger," and compared U.K. Prime Minister Keir Starmer to Neville Chamberlain for their perceived inaction. Trump expressed anger at member countries for ignoring his call to help after Iran effectively shut the Strait of Hormuz, and at Spain and France for restricting U.S. forces' use of their airspace or joint military facilities. He declared the moment "a mark on NATO that will never disappear."
The upcoming talks between Lebanese and Israeli officials, which Lebanon hopes will lead to a ceasefire and Israel hopes will lead to Hezbollah's disarmament, highlight the state's limited capacity to address fundamental power imbalances. Lebanon wants a halt to Israeli strikes before talks, a condition Israel is unlikely to agree to. Analysts believe Lebanon lacks the capacity to disarm Hezbollah by force or enforce any ceasefire without Hezbollah's agreement. While a ceasefire might stabilize oil prices and financial markets, reversing the global economic pain caused by the conflict may take far longer, demonstrating the limits of such diplomatic maneuvers in addressing the structural contradictions of the current economic order.