U.S.-Iran conflict drives oil prices higher and complicates Fed policy

Oil prices jumped more than 3.5% after the United States and Iran exchanged military attacks in mid-2026. The conflict has threatened shipping through the Strait of Hormuz, a waterway that carries about one-fifth of the world's oil and gas. American drivers are now paying $4.15 per gallon for petrol, which is $1.17 more than before the fighting started. Inflation rose to 3.3% in March, up from 2.4% the month before, because of higher energy costs. The Federal Reserve may now raise interest rates to control inflation. This creates a problem for new Fed Chair Kevin Warsh, who was sworn in on May 22, 2026. President Trump had chosen Warsh hoping he would cut rates, not raise them.