The oil price shock threatens to hurt Americans where it counts

The timing of the energy shock compounds other risks.

“President Donald Trump had the economic wind at his back at the start of the year: falling mortgage rates, relatively low inflation and cheap oil and gas”

CNN

A worse-than-expected jobs report Friday renewed fears a prolonged labor-market standstill could lead to job losses.

CNN

Higher inflation would create a difficult mix for the Federal Reserve.

Consumer spending—more than two-thirds of the US economy—already showed weakness with retail sales in January falling by the largest amount since May 2025.

Housing gains are also fragile.

Mortgage rates fell below 6% in the last week of February but rose back over 6% last week as investors demanded higher Treasury yields amid war-related uncertainty, threatening to freeze the housing market again.

The Trump administration says it has a plan to free up oil flows in the Strait of Hormuz, but markets remain skeptical.

Gregory Daco of EY-Parthenon outlined two scenarios: prices could fall within weeks and the shock be short-lived, or oil could trade over $100 a barrel for months, higher yields and inflation could persist, and the US could face job cuts and potential recessionary conditions.