Iran conflict and U.S. tariffs push gasoline, mortgage rates higher
Rising oil prices linked to the Iran war and new U.S. tariffs have lifted gasoline costs to over $4 per gallon and driven mortgage rates to their highest levels since mid-2025, tightening household budgets.
Gasoline prices reached $4.10 per gallon on Friday as global oil markets reacted to a reported attack on tankers in the Red Sea and ongoing tensions in the Iran-U.S. conflict. Brent crude briefly topped $100 a barrel, while U.S. crude rose to $92, prompting concerns about a new inflationary surge despite a recent dip to 3.5%.
U.S. Treasury yields climbed, with the 10-year note hovering just below 4.7%, its highest since January 2025. The rise in yields has lifted the average rate on a 30-year mortgage to 6.85% on Thursday, the highest level since June 2025, before easing slightly to 6.81% on Friday.
Moody’s Analytics chief economist Mark Zandi estimated that the war adds roughly $1,200 to an average household’s annual expenses, including $360 for higher gasoline, $240 for groceries and $205 from increased borrowing costs. He warned that the cost burden will grow as the conflict continues and oil insurance premiums rise.
Analyst Patrick DeHaan of GasBuddy noted that the approaching hurricane season could further pressure gasoline prices, forecasting a national average of $4.20-$4.30 per gallon despite a recent 3% dip in oil prices.
Shipping through the Strait of Hormuz, a key conduit for more than 20% of global energy supplies, has fallen sharply, with only six vessels reported crossing on Thursday. Reduced tanker traffic and dwindling strategic oil reserves, including a Strategic Petroleum Reserve at its lowest level since the 1980s, limit the ability to curb prices.
President Donald Trump downplayed the economic impact of the war, stating he does not consider Americans’ financial situation in negotiations with Iran. Polls in June showed 59% of voters felt pessimistic about the economy, a factor that could affect the upcoming midterm elections.
The administration has also reinstated broad tariffs, imposing 10%-12.5% duties on 60 trading partners, including China, Canada, the EU and Mexico, after a temporary 10% tariff expired. The new tariffs add uncertainty to trade and may further elevate consumer prices.
The Federal Reserve is expected to keep rates unchanged at its upcoming meeting, while European Central Bank President Christine Lagarde warned that sustained high energy prices could amplify broader inflationary pressures.