Trump’s Iran War: Rising Costs and Political Risks

President Donald Trump is confronting growing political pressure after authorizing military strikes against Iran. While the battlefield dynamics appear to favor the combined military strength of the United States and Israel, the more immediate challenge for the White House may lie at home, where the economic consequences of the conflict are beginning to unsettle voters.

The most visible pressure point is energy prices. Tensions around the Strait of Hormuz — a narrow maritime corridor through which nearly one-fifth of the world’s oil supply normally passes — have triggered sharp volatility in global markets. The price of Brent crude oil has climbed above US$100 per barrel, swinging as traders react to shifting signals from the conflict.

American consumers are already feeling the impact. The national average price for gasoline has jumped from about US$2.90 per gallon before the hostilities to around US$3.61. Although Trump has argued that higher oil prices benefit the United States because of its status as a major energy producer, that argument may carry limited political weight at a time when voters remain deeply concerned about inflation and the overall cost of living.

Public skepticism toward the war is also evident in opinion polls. A recent survey conducted by The Economist in partnership with YouGov found that only 39 percent of Americans approve of Trump’s handling of the Iran crisis, while 52 percent disapprove. The absence of a traditional “rally around the flag” effect suggests that the administration has yet to convincingly explain why military force was necessary.

Criticism has emerged even within Republican circles. Former congressman Charlie Dent argues that although the US military has performed effectively, the political and diplomatic case for war was never clearly articulated. Without a compelling strategic narrative, the conflict risks becoming a liability for Republican candidates in the approaching midterm elections.

Supporters of the war, including Senator Lindsey Graham, insist the campaign is degrading Iran’s nuclear and missile capabilities and weakening the government’s ability to project power. Yet the political challenge facing the administration is ultimately a question of time.

As long as tensions threaten energy routes and keep oil markets volatile, inflationary pressures are likely to intensify. Higher fuel and transportation costs could ripple through the broader economy, pushing up prices from farm inputs to supermarket shelves.

Military superiority may secure tactical advantages. Politically, however, prolonged wars often test economic resilience and public patience. For Trump, the decisive arena may ultimately be the domestic economy rather than the battlefield in the Middle East.

PSX benchmark index down 2.3%WoW

Pakistan Stock Exchange (PSX) remained volatile throughout the week, driven by ongoing Middle East military conflict. Overall, the benchmark index declined by 3,630 points or 2.3%WoW to close at 153,866 on Friday, March 13, 2026. Market participation remained moderate during the week, with average daily traded volumes declining to 548 million shares, from 791 million shares in the prior week.

Market began the week on a bearish note on Monday, as oil prices surged by more than 20% in intraday trading, with Brent crossing US$119/bbl in early trading as Iran conflict deepens with traffic halted at Strait of Hormuz. However, market largely recovered in subsequent session as oil prices stabilized after the announcement of release of 400 million bbl of oil from IEA strategic reserves, along with signals of easing sanctions on Russian oil following call between Trump and Putin. Moreover, status quo in the policy rate, with largely unchanged economic projections for inflation, current account, and foreign exchange reserves held by State Bank of Pakistan (SBP), supported investors’ confidence

IMF mission concluded its Pakistan visit for the third review, with end-of-mission statement noting significant progress, while discussions will continue in the coming days, including a more fully assessment of impact of recent global developments.

Economic indicators remained largely positive, with worker remittances remaining strong in February 2026, increasing by 5%YoY to US$3.3 billion.

OMC offtakes increased by 13%YoY, while auto sales continued growth, rising by 42%YoY during the month.

Other major news flow during the week included: 1) Prime Minister Shehbaz Sharif assures Mohammad Bin Salman of full solidarity during Jeddah visit, 2) Pakistan raises US$507 million through 5G spectrum auction, 3) GoP raises petrol and diesel prices, 4) RDA inflows rise 12%MoM and 19%YoY to US$242 million in the previous month, and 5) Foreign exchange reserves held SBP rose US$41 million to US$16.34 billion as of March 06, 2026.

Refinery, Leasing Companies and Jute were amongst the top performing sectors, while Woollen, Paper & Board and Transport were amongst the laggards.

Major selling was recorded by Companies and Foreigners with a net sell of US$16.5 million and US$13.4 million.

Individuals and Banks absorbed most of the selling with a net buy of US$10.8 million and US$11.7 million.

Top performing scrips of the week were: AICL, LOTCHEM, HINOON, PGLC, and YOUW, while laggards included: SAZEW, FCCL, MUREB, GHNI, and DGKC.

AKD Securities anticipates market sentiments to be dictated by developments in the ongoing Middle East conflict. GoP’s efforts to address energy conservation and the ongoing IMF review would also remain key areas of focus.

In the medium term, any de-escalation of Middle East military conflict could trigger a significant market recovery, as the recent correction has made market valuations much more appealing, with forward P/E now at 6.6x.

The brokerage house forecast the benchmark Index to reach 263,800 by end December 2026.

Top picks of AKD Securities include: OGDC, PPL, UBL, MEBL, HBL, FFC, ENGROH, PSO, LUCK, FCCL, INDU, ILP and SYS.