Voters will judge Trump on the economy – how is it doing?

Voters will judge Trump on the economy – The ongoing conflict in Iran has cast a long shadow over the US economy, with tensions escalating for over two months. Donald Trump had once forecast the war would last no more than six weeks, yet it continues to unfold, causing ripple effects across global markets. The crisis has disrupted energy supplies, triggering a surge in prices that echoes the oil shocks of the 1970s. From fuel to groceries, everyday costs have risen, placing additional strain on American households already grappling with inflation and rising living expenses.

Economic Growth Amid Turmoil

Despite these challenges, recent data suggests the US economy has maintained momentum. The most recent GDP figures, released this week, highlighted a 2% annualised growth rate in the first quarter of 2026. This marks a notable rebound after a slowdown in late 2025, offering a glimmer of hope amid uncertainty. The rebound, however, was not without its complications. Higher oil prices, a direct consequence of the Iran conflict and the temporary closure of the Strait of Hormuz, added pressure to an already strained consumer market.

Consumer spending, a critical driver of economic activity, grew at a slower pace than expected, rising by 1.6% annually. While this is less than the 2% growth seen in the GDP, economists argue it reflects a resilient consumer base. James Knightley, chief international economist at ING, noted that as consumer demand cools, “investment linked to tech and AI has clearly become the main engine of growth in the US.” This observation aligns with the significant contributions from tech giants, which have accelerated their AI-related spending, providing a counterbalance to the economic headwinds.

Inflation and Interest Rates

The inflationary pressures have not gone unnoticed. March’s inflation reading reached 3.3%, a near two-year high, up from 2.4% in February. This sharp increase is largely attributed to the soaring oil prices, which pushed Brent crude to a four-year peak of $126. While prices have since retreated to $111, they remain substantially higher than pre-war levels, which hovered around $73. The elevated costs have led to a surge in fuel and grocery prices, with Americans now paying $4.30 for a gallon of fuel by April, compared to less than $3 in February.

This inflationary spike has implications for monetary policy. The Federal Reserve, which had anticipated a series of rate cuts earlier in the year, has maintained its base rate at 3.5% to 3.75%. The decision to hold rates steady was influenced by the ongoing war, which has derailed any hopes of near-term interest rate reductions. Samuel Tombs, chief US economist at Pantheon Macroeconomics, warned that “higher oil prices and expectations of a prolonged US blockade of Iranian ports could see rate cuts delayed until 2027.” This delay adds to the pressure on Trump’s administration, as voters prepare to cast their ballots in November.

Stock Market Resilience

Amidst the economic turmoil, the stock market has shown remarkable resilience. Major US indices such as the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite have largely recovered from early losses in the conflict. The Nasdaq, in particular, has surged nearly 10% since the war began, while the S&P 500 has climbed about 5% and the Dow has risen just over 1%. These gains are positive for investors, especially those with retirement savings tied to stocks like 401(k) accounts.

The market’s performance underscores the strength of corporate earnings and the confidence of investors in the US economy’s ability to withstand external shocks. However, this optimism may not fully translate to voter sentiment, as the broader economic landscape continues to reflect the impact of rising living costs. While stock indices provide a measure of stability, the real-world consequences of inflation and energy prices remain a focal point for American voters.

Midterm Elections and Political Strategy

The upcoming midterm elections, scheduled for November, are expected to hinge heavily on economic performance. With the Republican party facing potential losses in both the House and Senate, the phrase “It’s the economy, stupid” has become a central theme in political messaging. Trump, leveraging his leadership role, is likely to use the Q1 growth figures as a strategic tool to reinforce his economic agenda.

Yet, the true test of the economy’s health lies in the cost of living. While headline GDP growth is positive, the sustained increase in everyday expenses could influence voter behavior. The war in Iran has not only raised energy costs but also intensified debates over trade policies, as US tariffs on imports have further burdened consumers. These factors, combined with the rising mortgage rates, present a complex economic picture that may shape the outcome of the midterms.

Freddie Mac data reveals that the average 30-year mortgage rate has climbed from 5.98% to 6.3% since the conflict began. This increase reflects the Fed’s decision to maintain higher interest rates, which could impact homebuyers and further pressure household budgets. For Trump’s campaign, the challenge will be to balance the positives of GDP growth with the negatives of inflation and rising costs, all while managing the expectations of a population increasingly focused on affordability.

As the war in Iran continues, the economic trajectory of the US will be closely watched. The outcome of the conflict, whether the Strait of Hormuz is reopened, will have a direct bearing on fuel prices and, by extension, the overall cost of living. This dynamic underscores the delicate relationship between political leadership and economic performance, with voters ultimately deciding the fate of Trump’s administration in the coming months. The stage is set for a critical assessment of the economy, one that will determine the political future of the country.