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Gas prices are above $4 a gallon. Grocery bills haven't come down much. Now, a new concern is building in the background.
Jerome Powell says global tensions are adding new uncertainty to the inflation outlook at a time when household budgets are already stretched, as recent data shows the biggest price increase since 2024.
"It's very uncertain," Powell said when discussing how the ongoing conflict could affect the economy. "We shouldn't assume it's going to be one thing or another." That uncertainty carries real implications for household finances.
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Why this could hit your wallet quickly
When tensions rise globally, oil is usually one of the first things affected. That's already happening. Oil prices jumped from around $70 to nearly $100 per barrel in a matter of weeks earlier this spring, and that increase is now showing up at the pump. The national average for gas has climbed as high as $4.16 per gallon in April.
But gas is just the starting point. Higher energy costs ripple through the entire economy. It costs more to ship goods, run factories, and transport food. Businesses pass those costs on, which means consumers end up paying more across the board. That uncertainty carries real implications for household finances.
The Fed is already adjusting its outlook
At its March meeting, the Federal Reserve raised its inflation expectations for 2026. Officials now expect inflation to land around 2.7%, up from 2.4% just a few months earlier. Core inflation, which excludes food and energy but reflects broader price trends, is also expected to hit 2.7%.
The increase may seem small on paper, but for households, it can translate into noticeably higher costs over time. And some economists think that estimate may be on the low side.
How bad could inflation get?
According to research from the Federal Reserve Bank of Dallas, inflation could rise much more depending on how long energy disruptions last.
If oil prices push past $110 per barrel, the situation could escalate quickly. In more severe scenarios, where supply disruptions drag on for months, oil could climb to $130 or even $160 per barrel. A spike like that could add more than one percentage point to inflation, which would be felt almost immediately in everyday costs.
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Where you'll feel inflation first
If inflation picks up again, it won't hit all at once. It shows up in layers. Gas is the most obvious. A typical driver is already paying about $60 or more for a fill-up, compared to closer to $50 just weeks ago.
Groceries tend to follow. Higher fuel costs mean higher transportation costs, and that gets baked into food prices quickly, especially for items that need frequent restocking.
Utilities can also rise, particularly electricity and heating costs tied to energy markets. Even delivery fees and everyday services can creep up as businesses adjust to higher operating costs.
Why this matters even if inflation stays "moderate"
The challenge for many households is that prices never fully reset. Even if inflation slows, it builds on top of already higher costs from the past few years. A 2.7% inflation rate today applies to a much higher cost base than in the past.
Even small increases can feel more noticeable because they build on already higher prices. That's why Powell's comments matter; they point to the possibility that cost pressures may stick around longer than expected.
The bigger risk the Fed is watching
There's another layer to this beyond just prices. If households start spending less because of higher costs, it can slow economic growth. The result is a difficult scenario where inflation stays elevated while growth slows.
Federal Reserve officials are watching closely to see whether rising energy costs begin to change consumer behavior in a meaningful way. That's where the real risk lies.
What you can expect in the coming months
Right now, the most likely scenario is continued pressure rather than a sudden surge. Gas prices could remain elevated or move higher depending on how global supply conditions evolve. This would keep upward pressure on transportation and goods.
At the same time, broader inflation may continue to tick up gradually rather than spike dramatically, unless energy markets worsen significantly. In other words, the squeeze may continue rather than suddenly intensify.
Bottom line
Jerome Powell isn't predicting exactly what will happen next, but his message is clear: rising global tensions are adding new economic uncertainty to the inflation outlook.
For Americans, that uncertainty translates into something more concrete. Higher gas prices, rising everyday costs, and a continued stretch for household budgets at a time when many were hoping for relief. And if energy prices keep climbing, that pressure is unlikely to ease anytime soon.
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