Trump widens strikes on Iran as oil-driven inflation sends markets into swoon
(Originally published June 11 in “What in the World“) Stocks fell and oil rose as Trump renewed attacks on Iran and U.S. consumer prices surged.
The benchmark S&P500 fell 1.6% to its lowest level in five weeks after the U.S. Bureau of Labor Statistics reported that the consumer price index jumped in May to 4.2% over the year before, the highest pace in three years. Brent crude futures rose more than 2% Thursday to $95.20 a barrel.
Most of May’s rise in consumer prices—about 60%—came from the rising cost of fuel. Energy prices in May rose 23.5%, with gasoline prices up 40.5%. Prices for food climbed 3.1% and “core” inflation—stripped of food and energy costs—rose 2.9%.
The news heightened concerns that the Federal Reserve won’t be able to cut interest rates, and might even need to raise them. Investors are now betting the Fed may raise rates by December.
And the prospect for lower energy prices seems to be dropping. Trump on Wednesday ordered the U.S. military to respond to fresh Iranian drone and missile attacks with new strikes against Iranian targets, including a civilian drinking water storage tank facility. “We hit them hard yesterday, and we’re going to hit them hard again today,” Trump said. He threatened more attacks if Iran failed to acquiesce to his peace demands, telling Fox News reporter Trey Yingst that “if they don’t sign the agreement, ‘we’ll bomb the shit out of them.’”
Iran responded by attacking U.S. bases in the Gulf. The renewed conflict reduces the likelihood that oil shipments through the Strait of Hormuz will recover anytime soon. With supplies curtailed, global stockpiles of crude oil and refined fuel continue to dwindle. U.S. oil inventories dropped another 1.7% in the week ended June 5, according to the latest data from the Energy Information Administration, bringing them to 5% below their five-year average for the same time of year.
Trump seems unfazed by the impact of his war on U.S. consumers, however. “I love the inflation. You know why?” Trump said Wednesday. “Because as soon as this war is over, you know I can say it now … you know we’ve been taking out millions of barrels of oil. We took out the other night, 22 ships, late at night, with no lights, because they don’t have any radar, because we blasted the crap out of it.”
While U.S. forces have been intercepting Iranian tankers trying to evade Trump’s blockade and seizing their cargoes, U.S. Energy Secretary Chris Wright told Congress Wednesday that he was unaware of the U.S. taking any oil out of Iran. According to The New York Times, the 22 ships Trump referred to weren’t Iranian tankers whose cargoes have been confiscated, but rather other nations’ commercial ships being escorted by U.S. forces through the Strait, not all of them necessarily even oil tankers. And that escort operation has only helped restore traffic through the Strait to roughly 200 ships a month, compared with a pre-war rate of 3,000 ships a month.
Meanwhile, investors have ponied up $250 billion to buy new shares in Elon Musk’s SpaceX, more than triple what the company is offering. SpaceX is offering to sell less than 5% of the company to investors for $75 billion in an initial public offering that will list the company’s stock at a market capitalization of roughly $1.8 trillion.
With Anthropic and OpenAI also planning IPOs this year and Google selling $80 billion in new shares last week, Big Tech’s appetite for investor cash to fund AI expansion is staggering. Technology deals account for more than 40% of all the money raised selling stocks in IPOs, rights issues and convertible bonds so far this year.
Big Tech isn’t just selling stock; it’s borrowing big. Tech companies have borrowed more than $150 billion so far this year, more than double what they did over the same period last year, and have issued more debt in 2026 than in any other year since 1999. Money is also pouring into unlisted “start-ups” like Anthropic and OpenAI, which have each raised more than $100 billion in venture capital.
All this cash is meant to go into building out the amazingly high-speed, remarkably unreliable, pseudo-conversational internet search summaries known as artificial intelligence. Goldman Sachs estimates that companies will spend $765 billion this year on AI infrastructure, with $7.6 trillion in cumulative investment by 2031. Just four of the largest tech companies, according to The Wall Street Journal, will spend more than $670 billion on AI infrastructure this year—an investment larger, relative to the economy, than the expansion of the U.S railroad network in the 1850s.