Trump’s Economic Record in Focus Before Midterms

The US economy expanded at the start of 2026 despite rising prices triggered by the war involving the United States, Israel and Iran, placing economic performance at the centre of political debate ahead of November’s midterm elections.

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New figures show the economy grew at an annualised rate of 2% during the first quarter of the year, rebounding after a slowdown late in 2025. The growth came even as the conflict in Iran entered its third month and disrupted global energy markets, pushing up fuel and household costs.

The fighting, which President Donald Trump had previously suggested could end quickly, has contributed to a surge in oil prices comparable to the energy shocks of the 1970s. The resulting increase in living costs is likely to shape how voters assess the administration as elections approach.

Growth supported by investment

Thursday’s growth figures provide support for the White House’s economic strategy in the run-up to the midterms.

Official statistics show the economy expanded by 2% on an annualised basis in the first three months of 2026. That represented a recovery after weaker growth late last year.

Consumer spending, which accounts for the majority of economic activity, rose by 1.6% on an annualised basis. Economists said the increase indicated that higher prices from tariffs and energy costs had not slowed household spending as sharply as many had feared.

However, analysts say a large share of the growth has been driven by corporate investment, particularly from technology companies spending heavily on artificial intelligence infrastructure.

James Knightley, chief international economist at ING, said that while consumer demand is beginning to cool, investment tied to AI development has become a key driver of economic expansion.

Rising costs for households

Despite the positive headline growth numbers, the cost of living remains a major concern for many Americans.

Energy prices surged after the conflict disrupted shipping routes and led to the closure of the Strait of Hormuz, a key channel for global oil supplies. Brent crude climbed to $126 a barrel, the highest level in four years, before easing to about $111. Prior to the outbreak of hostilities in late February, it had been trading near $73.

Higher oil prices quickly fed through to fuel costs for US motorists. By the end of April, Americans were paying an average of $4.30 per gallon, according to data from the American Automobile Association. In February the average price had been below $3.

The jump in energy costs contributed to rising inflation. Annual price increases reached 3.3% in March, up from 2.4% the previous month and the highest level in nearly two years.

Interest rates remain elevated

Rising inflation has also influenced monetary policy.

The Federal Reserve decided this week to keep its benchmark interest rate unchanged at between 3.5% and 3.75%. Before the war began, many economists had expected the central bank to begin cutting borrowing costs during 2026.

Mortgage rates have already moved higher since the start of the conflict. Data from Freddie Mac shows the average rate for a 30-year mortgage has climbed from 5.98% to 6.3%.

Samuel Tombs, chief US economist at Pantheon Macroeconomics, said the combination of higher oil prices and expectations that the US may maintain restrictions on Iranian ports could push potential rate cuts further into the future.

Stock markets recover

Financial markets have shown resilience despite the geopolitical tensions.

Major US indices have recovered early losses recorded after the outbreak of hostilities. The technology-focused Nasdaq Composite has risen about 10% since the conflict began, while the S&P 500 is roughly 5% higher and the Dow Jones Industrial Average has gained just over 1%.

Rising stock prices benefit investors and Americans with retirement savings tied to equities, such as those holding 401(k) plans.

Even so, the broader economic outlook could prove decisive in November’s midterm elections. While economic growth and strong markets may support the administration’s case, rising everyday costs remain a key concern for voters.

Much may depend on how the conflict with Iran develops in the coming months, including whether the Strait of Hormuz reopens and whether energy prices ease before Americans head to the polls.

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Adapted by ASEAN Now. Source 4 May 2026