US Gas Prices Rise 47%, Q1 Economy Grows 2%

US average gasoline prices have climbed to $4.30 per gallon, up from $2.98 before the Iran war began on February 28, representing a 47% increase. This surge is hitting consumers at the pump, with prices expected to exceed $5 in coming weeks. The rise follows disruptions in tanker traffic through the Strait of Hormuz.

The US economy grew at a 2% annualized rate in the first quarter of 2026, according to government data. This period included the initial weeks of the Middle East conflict, which began driving up energy prices. Core inflation rose 3.2% year-over-year in March, coming in hotter than expected.

Layoffs in the US fell to a 55-year low during the quarter. Grocery prices are beginning to increase as higher transportation costs ripple through the supply chain. The energy crunch stems from the attack on Iran and subsequent disruptions. The New York Times reported that gross domestic product expanded at a 2% annual rate in the first three months of the year.

The Washington Post noted that the economy picked up pace but inflation jumped. The New York Post added that the growth occurred as layoffs plunged.

Arab states are reassessing their security partnerships following the US-Israeli war on Iran and Tehran's retaliatory missile and drone attacks on Gulf Cooperation Council members. While defense ties with Washington remain, some states are seeking broader options to gain autonomy.

This trend predates the February 28 conflict but has accelerated due to perceived US disregard for Gulf warnings against attacking Iran.

“Historically, we have noticed that most Gulf countries courted Israel in order to get closer to the Americans." — Karim Emile Bitar, lecturer in Middle East Studies at Sciences Po Paris (Responsible Statecraft). Israel is emerging as a potential security partner for some Gulf states, leveraging its military technology and intelligence capabilities. Analysts note that this could position Israel as a necessary ally, exploiting fears of Iran. Gulf monarchies differ in their approaches, with the UAE leading in deepened cooperation. Israel secretly deployed an Iron Dome system to the UAE early in the war, intercepting dozens of Iranian missiles, according to Axios as cited in sources. This marked the first use of the system outside Israel or the US. The UAE has invested significantly in its relationship with Israel and may expand defense and intelligence sharing.”

Bahrain, reliant on the UAE, is likely to view Israel as a valuable defense partner due to its vulnerability to Iran. Kuwait may move toward de facto normalization, influenced by eroded democratic institutions and closer alignment with Abu Dhabi. Saudi Arabia faces public opposition to closer ties with Israel, with Crown Prince Mohammed bin Salman aware of potential unpopularity.

“The UAE has invested so much, reputationally and logistically, in its relationship with Israel." — Mira Al Hussein, fellow at the Alwaleed Centre at the University of Edinburgh (Responsible Statecraft). Qatar, bombed by Israel last year, sees both Israel and Iran as threats and is likely to strengthen ties with Saudi Arabia and Turkey instead. Oman views Israel as the greater regional threat and avoided condemning Iran publicly after attacks on its ports. The UAE announced its departure from OPEC and may withdraw from the Arab League and Organization of Islamic Cooperation. Saudi Arabia favors regional stability and the status quo, contrasting with perceived Emirati and Israeli policies aimed at fragmentation. Public opinion in Saudi Arabia remains opposed to normalization with Israel. Across the Gulf, alignments with Israel risk eroding legitimacy amid widespread anger over Israel's campaign in Gaza. The pursuit of security autonomy is leading to selective partnerships, shaped by pragmatism and political constraints. Daniel Levy, president of the US/Middle East Project, noted Israel's aim to become a key security partner. Courtney Freer, an assistant professor at Emory University, highlighted Kuwait's potential shift despite public unpopularity.”