A surge in oil prices tied to the conflict involving Iran may weaken the economic boost expected from Donald Trump’s major tax legislation, according to analysts.
Economists say higher fuel costs could offset much of the financial relief households were expected to receive through the administration’s tax cuts.
The legislation, widely referred to as the “One Big Beautiful Bill Act,” was designed to stimulate the economy by increasing disposable income through lower tax withholding and larger refunds.
However, rising energy costs may redirect much of that money toward gasoline and other fuel expenses.
Oil Price Surge Could Cancel Consumer Gains
Analysts at Raymond James estimated that a sustained rise in oil prices could erase the financial benefits consumers receive from the tax changes.
Strategist Tavis McCourt said that if oil prices remain roughly $20 higher than their levels before the war, the increased cost of gasoline alone could offset the economic boost from the tax cuts.
His calculations rely on the roughly $420 billion Americans spent on gasoline during the fourth quarter of 2025.
Based on those figures, a $20 increase in oil prices could push consumers to spend an additional $150 billion on fuel.
That estimate is strikingly close to the roughly $129 billion in tax savings expected from the bill’s individual tax cuts in 2025, according to the Tax Foundation.
Oil Prices Jump After War Tensions
Before the conflict escalated, U.S. oil prices had been trading at around $67 per barrel.
Following the outbreak of hostilities involving Iran, crude prices surged sharply, briefly jumping above $90 and remaining significantly higher than prewar levels.
Although prices have fluctuated since then, the energy market continues to face uncertainty.
Higher oil prices tend to push gasoline prices upward, which can quickly affect household budgets.
When fuel costs rise, consumers often have less money available for other purchases.
Timing Could Weaken Economic Stimulus
The oil surge is occurring at the same time many Americans are receiving tax refunds linked to the new legislation.
Analysts had expected those refunds to boost consumer spending and support economic growth in 2026.
Data from Citadel Securities shows that only about 30 percent of tax refunds had been distributed by early March.
That number is expected to climb to roughly 75 percent by early May.
Some economists warn that higher gasoline prices could absorb much of the extra cash that households receive from those refunds.
Gabriel Shahin, CEO of Falcon Wealth Planning, said the increased energy costs may redirect money that would otherwise flow into retail purchases and other consumer spending.
Some Analysts Remain Optimistic
Not all economists believe higher oil prices will derail the broader economy.
Dan Niles of Niles Investment Management argues that the tax refunds may actually help households manage the impact of higher fuel costs.
He pointed to recent years when energy prices surged yet the economy avoided a recession.
During 2022 and 2023, oil prices climbed significantly while interest rates were rising, but the U.S. economy remained resilient.
According to Niles, similar conditions today may allow consumers to absorb higher fuel costs without dramatically cutting spending.
Economic Conditions Differ From Past Oil Shocks
Some analysts caution against comparing the current situation too closely with past energy crises.
Stephanie Roth, chief economist at Wolfe Research, noted that the broader economic backdrop today is different from previous oil shocks.
Several years ago, inflation was significantly higher and job growth was far stronger.
Today inflation is closer to 3 percent and employment gains have slowed in recent months.
Those differences could change how the economy reacts to rising oil prices.
Consumer Spending Still Key to Economic Outlook
Even if tax refunds provide less stimulus than originally expected, economists say the overall outlook may not shift dramatically.
Consumer discretionary stocks have already lagged behind the broader S&P 500 this year, suggesting investors were not expecting a massive surge in consumer spending.
McCourt said the broader economy can likely withstand higher oil prices as long as the labor market remains stable.
Historically, major declines in consumer spending have occurred only when significant job losses take place.
For now, the debate around Trump big beautiful bill oil prices highlights how rising energy costs could reshape the economic impact of the administration’s flagship tax policy.
The post Rising Oil Prices Could Undermine Benefits of Trump’s Big Beautiful Bill appeared first on .
Continue reading...