A war that was supposed to last weeks is now reshaping the global economy and squeezing American wallets

"Donald Trump once predicted the US-Israeli war in Iran would last no longer than six weeks." It has now entered its third month, unleashing a global energy shock reminiscent of the 1970s oil crises and sending prices for fuel, food, and everyday essentials soaring.

Yet in a twist that defines the current economic moment, the US economy is still growing.

Fresh GDP figures show momentum in early 2026, even as households face rising costs and uncertainty. With midterm elections looming in November and no clear end to the conflict, voters are being pulled in two directions: solid growth on paper, and real pain at the checkout line.

Growth holds steady despite mounting pressure

In the run-up to a high-stakes election, Trump is expected to lean heavily on the latest economic data to defend his strategy.

The US economy expanded at a 2% annualized rate in the first quarter of 2026, rebounding from a late-2025 slowdown, according to official figures. The growth came despite tariffs pushing up prices and the economic shock triggered by the Iran war.

Consumer spending, a key driver of the economy, rose by 1.6%. That is weaker than previous highs but stronger than many economists feared.

Behind the headline number is a powerful force reshaping the economy.

"Investment linked to tech and AI has clearly become the main engine of growth in the US," said James Knightley, chief international economist at ING, pointing to massive spending by tech giants racing to expand artificial intelligence infrastructure.

Cost of living crisis intensifies

But strong GDP numbers may not be what decides the election.

November’s vote is widely seen as a referendum on everyday affordability, echoing the long-standing political reality: "It's the economy, stupid."

The Iran conflict has driven oil prices sharply higher after the closure of the Strait of Hormuz, a critical global shipping route. Brent crude surged to a four-year high of $126 before easing to $111. Before the war, it hovered around $73.

The impact on American consumers has been immediate and painful.

Gas prices jumped to $4.30 per gallon by the end of April, up from under $3 in February, according to American Automobile Association data.

That surge fed directly into inflation. March’s annual inflation rate hit 3.3%, a near two-year high and a sharp increase from February’s 2.4%.

For many households, the economic reality is simple: wages are not rising fast enough to keep up with costs.

Interest rate relief pushed further out

Hopes for financial relief have also taken a hit.

Before the war, markets expected the Federal Reserve to begin cutting interest rates in 2026. That outlook has now shifted dramatically.

The central bank held its benchmark rate steady at 3.5% to 3.75%, citing inflation risks tied to higher energy prices.

Borrowing is getting more expensive.

The average rate on a 30-year mortgage has climbed from 5.98% to 6.3% since the conflict began, according to Freddie Mac data.

Samuel Tombs, chief US economist at Pantheon Macroeconomics, warned that prolonged high oil prices and continued pressure on global supply routes could delay rate cuts until 2027.

Markets surge even as risks grow

While consumers feel the strain, investors are seeing gains.

Major stock indices have not only recovered early losses from the conflict but pushed higher.

The Nasdaq Composite has risen about 10% since the war began. The S&P 500 is up roughly 5%, while the Dow Jones Industrial Average has gained just over 1%.

For Americans with retirement savings tied to the market, including 401(k) plans, the rally offers a financial cushion.

But it also highlights a growing divide between Wall Street and Main Street.

Election stakes rise as economic divide widens

With Republicans at risk of losing control of the House and potentially the Senate, the November elections are shaping up to be a defining moment.

Strong GDP growth and rising stock markets give Trump and his allies powerful talking points.

But the reality voters face every day may tell a different story.

Rising fuel costs, higher grocery bills, and stubborn inflation are likely to weigh heavily on public sentiment.

Ultimately, the direction of the economy and the election itself may hinge on factors beyond Washington’s control.

If the conflict in Iran drags on, if the Strait of Hormuz remains disrupted, and if energy prices stay elevated, the pressure on American households will only intensify.

And that could be the deciding factor when voters head to the polls.