**
As the United States grapples with the ramifications of a protracted conflict involving Iran, the economic landscape presents a mixed picture for voters assessing former President Donald Trump ahead of the upcoming midterm elections. While recent gross domestic product (GDP) figures show a robust economic performance in early 2026, surging energy prices and rising inflation are likely to weigh heavily on the minds of American voters.
Economic Growth: A Silver Lining Amidst Turmoil
The initial quarter of 2026 has revealed an annualised economic growth rate of 2%, a significant rebound following a slowdown at the end of the previous year. This growth appears to defy expectations, particularly in light of the pressures consumers face due to tariffs and a global energy crisis triggered by the ongoing conflict in Iran.
Despite these challenges, consumer spending remains surprisingly resilient, with an annualised increase of 1.6%. Experts attribute much of this growth to substantial investments from technology companies, particularly in the field of artificial intelligence (AI). James Knightley, chief international economist at ING, stressed that while consumer spending may be cooling, “investment linked to tech and AI has clearly become the main engine of growth in the US.”
The Cost of Living: A Crucial Factor for Voters
As the midterm elections approach, Trump’s Republican Party finds itself navigating a precarious political landscape. The mantra “It’s the economy, stupid” is more pertinent than ever, yet voters are likely to focus on the rising cost of living rather than abstract growth figures.
The conflict in Iran has exerted upward pressure on oil prices, with Brent crude reaching a four-year peak of $126 per barrel before settling at around $111. This spike has directly impacted consumers, who are now paying an average of $4.30 (£3.17) per gallon of petrol, a dramatic increase from under $3 before the hostilities began.
This inflationary environment has raised the annual price increase rate to 3.3% as of March, the highest in nearly two years, up from 2.4% the previous month. The escalating costs of fuel and groceries are increasingly likely to shape voter sentiment as Americans head to the polls.
Interest Rates: The Federal Reserve’s Dilemma
The ongoing conflict and the subsequent spike in inflation have forced the Federal Reserve to maintain interest rates, which currently sit between 3.5% and 3.75%. Prior to the crisis, economists had anticipated potential rate cuts, but those hopes have been dashed as inflation continues to rise, primarily driven by higher oil prices.
The average interest rate for a 30-year mortgage has climbed from 5.98% to 6.3% since the onset of the conflict. Samuel Tombs, chief US economist at Pantheon Macroeconomics, forecasted that the combination of elevated oil prices and an extended blockade of Iranian ports could delay any rate reductions until 2027. For many American households, this translates into increased borrowing costs and mounting financial pressure.
Stock Market Resilience: A Mixed Blessing
Interestingly, the stock market has shown signs of resilience amid the turmoil. Major indices, including the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite, have recovered losses incurred during the initial phases of the conflict, with the Nasdaq rising by approximately 10% since the hostilities began.
This recovery is beneficial not only for investors but also for those with pensions tied to stocks, such as 401(k) plans. However, while these figures may offer some solace to Republican strategists, the broader economic implications of high living costs continue to overshadow market gains.
Why it Matters
The upcoming midterm elections will hinge significantly on how voters perceive the current economic landscape, particularly in light of the rising cost of living. While growth figures and stock market performance may provide a foundation for Trump to assert the strength of his economic policies, the realities faced by everyday Americans—marked by soaring fuel prices and inflation—are likely to dominate voter sentiment. The trajectory of the Iran conflict and its impact on the economy could ultimately determine the Republicans’ fate as they seek to retain their grip on power in Washington.
