Trump Decisions Threaten Bull Market as Iran War Lifts Inflation Toward 3.89%
Updated
Updated · The Motley Fool · May 17
Trump Decisions Threaten Bull Market as Iran War Lifts Inflation Toward 3.89%
6 articles · Updated · The Motley Fool · May 17
Two Trump moves — backing the Feb. 28 attack on Iran and elevating Kevin Warsh to lead the Fed after Jerome Powell’s May 15 exit — are cited as the clearest risks to the current stock rally.
Iran’s shutdown of the Strait of Hormuz put 20 million barrels a day at risk, pushing average U.S. regular gasoline to $4.54 a gallon by May 6, up $1.56 since the war began.
That energy shock is already feeding inflation: trailing 12-month CPI rose from 2.4% in February to 3.3% in March, with the Cleveland Fed nowcasting 3.89% for May.
Warsh’s record as a Fed governor marked him as an inflation hawk, and with several FOMC members already resisting an easing bias, markets face a growing chance of neutral or higher-rate policy.
That would undercut a key pillar of the Trump-era rally — cheap capital — leaving the Dow, S&P 500 and Nasdaq vulnerable after gains of 57%, 70% and 142% in Trump’s first term.
Will the new Fed's war on inflation trigger a global recession amid the ongoing energy crisis?
Can a central bank fix an inflation crisis caused by war and supply chain collapse?
Inflation Surges, Oil Shock, and the 2026 Stagflation Threat: How the Iran Conflict and Fed Transition Are Reshaping the U.S. Economy and Politics
Overview
In April 2026, the U.S. economy faced a sharp surge in inflation, with prices rising 3.8% over the year while average paychecks grew only 3.6%. This marked the first time in three years that wages fell behind the cost of living. Inflationary pressures were widespread, affecting many sectors, as core inflation climbed 2.8% year-over-year and 0.4% monthly. Key contributors included rising shelter costs and the impact of tariffs on apparel and household furnishings. These broad-based price increases signaled a turning point, highlighting growing economic challenges for American households and setting the stage for further policy and market shifts.