The price board at gas stations is the quickest way for ordinary Americans to understand inflation.

In March, the national average retail gasoline price surpassed $4 per gallon for the first time in nearly four years. This was not due to OPEC reducing production, nor because of declining shale oil output, but because of a war. A war that ignited in the Persian Gulf, over ten thousand kilometers away from the American mainland.

The recent halt in negotiations means we will continue to bear the impacts of the war, such as the possibility of no interest rate cuts this year.

A war could push inflation back to 2022?

On February 28, the United States and Israel launched military strikes against Iran. This established a timeline that redefines the trajectory of the U.S. economy through 2026.

Brent crude oil skyrocketed from about $70 per barrel before the conflict erupted to $118 per barrel by the end of March. Although oil prices have since retreated somewhat, they have remained around $96 per barrel recently. The price increase exceeded 50%, influenced by a crucial waterway: the Strait of Hormuz.

Iran has effectively blocked shipping in the Strait of Hormuz, through which about one-fifth of the world's oil supply is transported. Reports indicate that even during negotiations, the blockade status has largely remained unchanged.

This is not just an issue of oil prices. The gasoline price index accounts for nearly three-quarters of the month’s CPI increase, with a month-on-month increase of 21.2% and a year-on-year increase of 18.9%. Every time there is a refueling, every bill, punishes ordinary American families in concrete and fragmented ways. Since last week, the national average retail gasoline price exceeded $4 per gallon for the first time in nearly four years.

The energy shock is also spreading throughout the entire economy.

Rising diesel prices are driving up food transportation costs; fertilizers, also an important export item transported via the Strait of Hormuz, may increase costs for farmers and consumers due to supply disruptions. CPI data shows that food prices have risen by 2.7% year-on-year.

Not just food. Amazon will impose a 3.5% fuel and logistics surcharge on third-party sellers in the United States and Canada, and delivery companies like UPS and FedEx have also raised fuel surcharges since the outbreak of the Iran conflict. The reach of inflation extends into every corner.

According to calculations of the correlation between oil prices from 2020 to 2025 and the U.S. CPI inflation rate, if Brent crude oil prices remain between $85 and $100 per barrel in 2026, the year-on-year oil price increase could reach around 30% to 50%, potentially raising the U.S. CPI inflation rate by 1 to 2 percentage points.

And this is just the beginning. Even if a ceasefire continues, considering the destruction of energy facilities and the disruption of supply chains are unlikely to be swiftly repaired, oil prices may remain above pre-conflict levels in the medium term, and the upward pressure on the year-on-year CPI may last for several months.

Ryan of Capital Economics stated that some inflation effects from energy prices may take months to transmit to consumers through the supply chain, and the impact could be "very broad."

A war has pushed U.S. inflation from 2.4% in February directly to 3.3%, meaning a month-on-month CPI increase of 0.9% in March, the largest single-month increase since June 2022.

（Note from Rhythm BlockBeats: In June 2022, due to the Russia-Ukraine war, COVID-19, and the Fed's slow response, the year-on-year CPI increase reached 9.1%, the highest since 1981.)

The door for interest rate cuts is half closed

Before the war, the market presumed that the Trump administration had a carefully designed political script:

On January 30, 2026, Trump officially nominated former Fed Governor Kevin Warsh to be the next Fed Chair. The era of Powell was declared over. The market quickly began to price: with a new chairperson taking office, the interest rate cut path was clear. After Warsh was nominated, most futures traders set their expectations for two interest rate cuts this year.

There is a fairly clear political interpretation of this personnel arrangement from the outside. Wilcox, the Director of U.S. Economic Research at Bloomberg Economics, stated that regardless of who ultimately receives the nomination, they will face public skepticism upon taking office, as people will believe they must promise to follow the President's directives at the Fed, the first and most important being to push for a significant cut in the federal funds rate regardless of inflation consequences.

As such, nearly all economic analyses and macro judgments at the beginning of the year suggested that the actual pace of monetary policy easing by the Fed in 2026 might be faster than the market expected, with 2 to 3 rate cuts for the year totaling 50 to 75 basis points.

But after the war, the data changed drastically.

Polymarket currently gives a 44% probability that there will be no interest rate cuts in 2026; before the outbreak of the war, that probability was only 4%. However, since the start of the war, the probability of no interest rate cuts has steadily risen, remaining at the highest likelihood of no cuts since the end of March. Additionally, the current probability of a single 25 basis point cut stands at 26%. Another prediction platform, Kalshi, puts the no rate cut scenario at 38.5%, with trading volumes on these platforms reflecting real financial bets.

Previous minutes from the Federal Reserve's FOMC meeting on March 17-18 showed that most officials were concerned the war might damage the labor market, necessitating a rate cut; at the same time, many decision-makers emphasized inflation risks, indicating that rate hikes might ultimately be necessary. The Fed maintained interest rates in the range of 3.5% to 3.75% during the March meeting.

One meeting's minutes contained the potential for both rate cuts and hikes. This might also be one of the most awkward situations in the Fed's history.

Persistent inflation has led some economists to believe the Fed will not cut rates this year. Federal funds rate futures pricing shows that the probability of maintaining rates this year remains over 70%.

Chris Zaccarelli of Northlight Asset Management pointed out that the duration of the war and the situation in the Strait of Hormuz are critical. If supply shocks are temporary, the economy can endure, and the Fed may have an opportunity to cut rates within the year. But if inflation shocks are more persistent, they may have to refrain from action throughout the year.

Gregory Daco, Chief Economist of EY Parthenon, cautiously predicts that looking towards the fourth quarter and year-end of 2026, there may be factors pushing the Fed to ease monetary policy, but that would be for terrible reasons. He also raised a realistic possibility: the Fed's next move could be to raise rates.

This is no longer a matter of "delayed rate cuts for a few months." This is a policy crisis with a script thoroughly disrupted.

The situation for the Republicans is quite severe

Trump's governance logic has always been highly pragmatic. Rate cuts have never been just about monetary policy; they are one of the pillars of Trump's political agenda.

The reasoning isn’t complicated. Rate cuts lower borrowing costs, stimulate consumption, boost the stock market, and make ordinary people feel that money is easier to earn. And this feeling will be reflected in the ballot box. With the reality pressure of the midterm elections approaching at the end of the year, as of the time of writing, Polymarket data shows that the probability of the Democratic Party winning the House of Representatives in the midterm elections is as high as 86%, and the probability of winning the Senate has shifted from a pre-war disadvantage of 36% to a 56% advantage.

The situation for the Republicans has become quite severe.

Left is the House of Representatives, right is the Senate.

The issue is that the political fundamentals for the midterm elections had largely been locked in as early as June. From now, the time window is running low.

To focus on preparing for the upcoming midterm elections, Trump needs to quickly achieve a de-escalation of the conflict to stabilize the capital markets and claim achievements.

Otherwise, the rising costs of oil will clearly manifest in the U.S. economy and in consumer spending, which would deal a blow to Trump’s midterm election prospects and his public support.

This is precisely why Trump is so eager to seek negotiations with Iran.

Iran using delay tactics

And the Iranian side is quite clear about this.

The negotiations that began on April 10 in Islamabad were declared broken two days later. On April 12, U.S. Vice President Vance announced in Islamabad that the negotiations had collapsed due to Iran's nuclear weapons issue, and the U.S. delegation left Pakistan for Washington.

The failure of the negotiations was not unexpected.

The gap between the two parties' conditions was already laid out before talks began. According to analysis, U.S. demands include: Iran must unconditionally open the Strait of Hormuz, must stop all nuclear activities, the number and types of Iranian missiles must be limited, there should not be any missiles that can reach Israel, and all relationships with proxies must be severed. Meanwhile, the conditions presented by Iran to the U.S. are equally lofty: demands for complete withdrawal of U.S. troops from the entire Middle East, U.S. and Israel must cease all combat actions in the Middle East, and the U.S. must lift all economic sanctions imposed on Iran over the past 47 years, along with war reparations to Iran.

These are not two closely related proposals. They are demands from parallel universes.

Some American think tanks believe Iran may choose "long-term play," using the midterm elections as a "pressure point" against the U.S.

Understanding this requires recognizing a fundamental asymmetry between the U.S. and Iran: Trump has a term limit, while Iran does not. As a dictatorship, the Islamic Republic has existed for nearly half a century without the pressure of electoral turnover. Iran does not need to complete anything before the end of 2026. It only needs to wait. Wait for the window for Trump's midterm elections to close, wait for pressure on the Republican Party in the House, wait for the political costs in Washington to become high enough, and wait for the U.S. to find its own way to step down.

If Trump continues the hostilities and sends ground troops into Iran, it means the U.S. would once again be embroiled in this war, potentially entangling itself with Iran for the long term, which does not align with U.S. national security strategy and is a blow to many of Trump's domestic and foreign agendas.

Trump himself has also acknowledged the difficulties in negotiations. He stated that negotiations were progressing well, with agreements reached on most topics, but the one truly important point—the nuclear issue—had not been resolved. The nuclear issue is precisely the bottom line that Iran will not concede on in the short term.

Now the entire situation is: Trump holds demands for rate cuts, midterm election pressures, and military burdens for war with Iran, all three pressing down on a clock, with the clock speeding towards November. Iran does not need to win. It only needs to hold on, allowing the negotiations to continue to drag on.

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。