Rising oil prices may wipe out effects of Trump’s ‘big beautiful bill’

Gas prices are on the rise, and this could have significant implications not only for consumers but also for President Donald Trump’s signature legislative achievement, the “big beautiful bill.” The recent spike in oil prices, driven by the U.S.-Iran war, has the potential to negate the economic benefits of the individual tax cuts included in the bill.

According to analysts at Raymond James, if oil prices remain elevated by more than $20 compared to pre-war levels, the impact on consumer spending could erase almost all the benefits of the tax cuts. Tavis McCourt, a strategist at Raymond James, estimates that a $20 increase in oil prices could result in consumers spending an additional $150 billion at the pump. This figure is higher than the estimated $129 billion in individual tax cuts set to be distributed through tax refunds this year.

Before the U.S.-Iran war, oil prices were around $67.02 per barrel. However, as of Tuesday morning, oil is trading at over $88.20 per barrel, more than $20 higher than pre-war levels. This significant increase in oil prices could have a substantial impact on consumer finances and the overall economy.

Stephanie Roth, chief economist at Wolfe Research, also raised concerns about the potential impact of higher oil prices on consumer spending. While she believes that oil prices would need to remain above $100 for an extended period to significantly impact consumer spending, the current situation is still cause for concern.

It typically takes time for oil prices to stabilize after a geopolitical event like the U.S.-Iran war. Past conflicts, such as the Gulf War in 1990 and the Russian invasion of Ukraine in 2022, resulted in prolonged periods of elevated oil prices. McCourt noted that it took around six months for oil prices to return to pre-conflict levels in those cases.

The implications of higher oil prices are particularly concerning given the timing of the tax refunds from the “big beautiful bill.” Citadel Securities estimates that only 30% of refunds had been distributed by March 1, with the majority expected to be distributed by May 1. This influx of cash was expected to boost consumer spending and stimulate the economy, but higher oil prices could redirect that money towards energy costs instead.

Despite the challenges posed by higher oil prices, some experts remain optimistic about the economy’s resilience. Dan Niles, a portfolio manager at Niles Investment Management, pointed out that the economy has weathered similar challenges in the past. He highlighted previous instances when oil prices surged, and the economy continued to perform well.

As the situation continues to evolve, it remains to be seen how higher oil prices will impact consumer spending, economic growth, and the overall success of President Trump’s tax cuts. In the meantime, consumers may need to brace themselves for higher fuel costs and potentially lower disposable income in the months ahead. As we look at the current surge in prices and the potential impact on the economy, it is essential to consider the differences between the current situation and past events. Many have pointed to similarities with the surge in prices four years ago when Russia invaded Ukraine. However, experts caution against drawing direct comparisons.

According to Roth, the economic landscape today is vastly different from what it was in the past. Core inflation is currently at 3%, compared to 5.5% back then. Job growth has slowed significantly, with only 37,000 new jobs added over the past couple of months, compared to around 500,000 previously. These factors create a unique backdrop that cannot be directly compared to previous events.

McCourt also weighed in on the situation, suggesting that if the stimulus from the tax bill does not have the anticipated impact, it may not significantly alter outlooks for the year. Stocks, in particular, never priced in a substantial increase in consumer spending, as evidenced by the underperformance of consumer discretionary stocks compared to the S&P 500 in 2026.

Despite potential challenges such as high oil prices and weaker-than-expected stimulus, McCourt believes that the economy can weather these storms as long as the labor market remains stable. He noted that historically, sustained pullbacks in consumer spending have been accompanied by significant job losses. As long as the labor market remains intact, consumer spending levels are unlikely to be severely impacted.

Overall, while there are concerns about inflation and high oil prices, the consensus among experts is that the current economic environment is resilient. By analyzing the unique factors at play and considering historical trends, it becomes clear that the economy may be able to withstand these challenges without plunging into a recession.