Federal Reserve Bank of Chicago President Austan Goolsbee told CBS News on April 3 that before the Iran war began, he was confident the Fed could cut its benchmark interest rate in 2026. That confidence is gone. The Iran war, he said, is driving up oil and fuel prices in ways that risk fueling inflation — exactly the kind of inflationary pressure that would force the Fed to keep rates higher for longer, or abandon planned cuts entirely. This is not an abstract economic concern. Millions of Americans have been waiting for rate cuts to refinance mortgages, finance car purchases, reduce credit card debt, and lower the cost of business borrowing. That relief is now at risk because of a war Congress never authorized.
What Goolsbee Said.
Goolsbee was careful to note he was speaking for himself and not for the Federal Reserve as a whole. But the substance was direct: before the conflict, he was confident the Fed could cut its benchmark rate in 2026. That optimism has waned as the war drives up oil and fuel prices. The Strait of Hormuz — through which approximately 130 ships per day normally transit — is currently operating at six or fewer ships per day, with Iran effectively controlling access. That chokepoint handles a significant portion of global oil supply. With it effectively closed and the war showing no clear exit ramp, oil markets are pricing in sustained disruption. Gas has hit $4 a gallon for the first time since 2022. Airline fuel surcharges have doubled in some markets. Heating and cooling costs are rising.
The Federal Reserve sets its benchmark interest rate partly based on inflation expectations. When inflation is elevated or rising, the Fed keeps rates higher. When inflation cools, the Fed can cut. Many Americans have been waiting for cuts that would reduce mortgage rates, car loan rates, and credit card APRs. The Iran war's effect on oil prices adds inflationary pressure that makes those cuts harder to justify. Millions of households paying elevated rates on everything from home loans to student debt are now absorbing the economic cost of a war they had no vote on.
Trump Said He’d Lower Gas Prices on Day One.
During the 2024 campaign, Trump repeatedly promised that energy prices would drop immediately upon his return to office. "Drill, baby, drill" was the slogan. Lower gas prices were a central campaign promise — one he repeated at nearly every rally, always framing inflation and energy costs as a Biden failure he would immediately reverse. Gas is now at $4 a gallon. Trump's response when asked about rising prices: he blamed Iran for attacking oil tankers and neighboring countries, calling the price spike "entirely the result of the Iranian regime launching deranged terror attacks." He did not mention that it was his war. He did not mention that the war closed the Strait of Hormuz. He did not mention that this was entirely foreseeable.
He promised to lower gas prices on Day One. He started a war that closed a global oil chokepoint and drove gas to $4 a gallon. Now the Fed can't cut rates. Your money. His war. No vote.
The Broader Economic Damage.
The Iran war's economic footprint extends well beyond gas prices. Global airline ticket prices have surged as jet fuel costs more than doubled in some markets. Korean Air moved into "emergency management mode." New Zealand and the Philippines warned of possible flight groundings. Australia's prime minister addressed the nation to urge people not to panic-buy fuel. The IMF warned of broader economic damage and said it would release a full assessment in mid-April. French finance officials asked the European Commission to investigate whether refineries were using the war as cover for price gouging. The global food supply chain — which depends on shipping through the Strait of Hormuz for fertilizer and fuel — is also under stress. All of this because Trump launched a war without asking Congress, without a clear exit strategy, and without apparently understanding how it would affect the global economy.
Sources
- CBS News: Federal Reserve Bank of Chicago President Austan Goolsbee says the Iran war risks fueling inflation and has made him less confident the Fed can cut rates in 2026.