Financial markets are pricing in months of higher gasoline prices, stretching right through the summer and beyond. Photo: MarketWatch photo illustration/Getty Images, iStockphoto

Brett Arends

Congratulations, President Trump: The Israeli-U.S. war against Iran has just wiped out all of the U.S. gasoline-price savings achieved since you took office in January of last year.

Average U.S. gasoline prices rocketed Tuesday to $3.109 a gallon, according to AAA. That’s exactly where they were on Jan. 20, 2025. That’s an astonishing jump of 15 cents since the start of the war a few days ago, and of 30 cents since the start of this year.

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This is especially embarrassing, as it’s exactly a week since Donald Trump was bragging about how much gasoline prices had fallen since he took office. “Prices are plummeting downward,” the president told the American public and a joint session of Congress during his marathon State of the Union address. “Nobody can believe when they see the kind of numbers, and especially energy, when they see energy going down to numbers like that, they cannot believe it. It’s like another big tax cut.”

The costs of this war to regular Americans doesn’t stop there, either. Financial markets are now pricing in months of higher gasoline prices, stretching right through the summer and beyond. The futures markets think this war will still be adding at least 15 cents to a gallon of gas in September.

Meanwhile, panic is spreading across the rest of the markets, with stocks and bonds tumbling. The S&P 500 fell by 1.5% on Tuesday. The average stock in the index fell 2.6%, while the S&P 400 index of midsize companies, often seen as the backbone of the U.S. economy, fell 3.5%. Long-term interest rates have also surged as fears of rising inflation more than offset fears of an economic slowdown. The yield on the 10-year Treasury note jumped to 4.07%, up from 3.97% before the attacks on Iran. That will reverse the recent decline in 30-year mortgage rates, which had at last fallen below 6% just last month. Not for long, the way things are going.

Ominously, by Tuesday even energy stocks had started to fall, as investors began looking past the immediate surge in energy prices, which will benefit energy companies, to a possible wider economic slowdown, which will hurt them.

Writing about the financial implications of a geopolitical and humanitarian crisis requires a balancing act.

For example, a Substack column by Todd Legum, Rebecca Crosby and Noel Sims contrasts the terrible death toll of the war with the casino behavior of some … er … remarkably well-informed people. A small number of speculators have already made hundreds of thousands of dollars with brilliantly timed bets on the conflict. Somehow they knew or guessed just when war was about to break out. They placed their anonymous bets at two online betting exchanges that just happen to have business relationships with members of the Trump family and pay them money.

Nothing to see here, folks. Move along.

(Remind me to read some more tweets from Trump family adviser Roger Stone about the “Biden crime family” and the “Clinton crime family.”)

But regular Americans, who lack access to the kind of amazing insight that might allow them to make $100,000 in blood money by betting in advance on a war, face the opposite challenge: Working out how to protect their hard-earned savings from geopolitical turmoil and market mayhem.

In these circumstances, it’s reasonable to argue that for investors, at least, the news may be so bad it’s good: In other words, even the man who is actually calling the shots in the war on Iran knows that the TACO trade — “Trump Always Chickens Out” — must soon kick in.

Israeli Prime Minister Benjamin Netanyahu is presumably hoping to score as many wins as possible against Middle Eastern enemies before the president is forced into yet another one of his embarrassing U-turns.

Trump and his beleaguered party hardly want to go into the fall’s crucial midterm elections with skyrocketing energy prices and a collapsing economy.

So the odds have to be good that the president will reverse course. And the worse things look, the more likely that becomes.

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Via https://www.marketwatch.com/story/get-ready-for-trump-to-chicken-out-on-iran-as-markets-fall-and-gas-prices-rise-52f09fb7