Potential Stock Market Crash Looms as Fed Faces Tough Decisions

Skyrocketing gas prices may be just the tip of the iceberg as the Federal Reserve's next moves could upend the tech-driven bull market under President Trump.

Mar. 28, 2026 at 8:06am

Got story updates? Submit your updates here. ›

As the Iran war disrupts global energy supplies, causing gas prices to soar, experts warn that the real threat to the stock market may come from the Federal Reserve. With inflation spiking and the FOMC divided, the central bank's next policy decisions could trigger a market crash, even as the Dow, S&P 500, and Nasdaq have thrived under President Trump's tenure.

Why it matters

The stock market's performance has been a point of pride for the Trump administration, but the Federal Reserve's actions in response to rising inflation and geopolitical tensions could undermine that. A potential market crash would have widespread economic impacts, particularly on low-income households already struggling with higher fuel costs.

The details

The Iran war has led to a historic disruption in global energy supply, with the closure of the Strait of Hormuz causing oil prices and gas prices at the pump to skyrocket. While the direct impact on household budgets may not be catastrophic, the bigger concern is how the Federal Reserve will respond to the resulting spike in inflation. The FOMC has been divided in recent meetings, raising the possibility of policy changes that could dash investors' hopes for further rate cuts and send the markets tumbling.

  • On February 28, U.S. and Israeli forces commenced military operations against Iran.
  • Shortly after, Iran announced it would virtually close the Strait of Hormuz to oil exports.
  • The average nationwide price for a gallon of regular gas has skyrocketed 34% over the last month to roughly $3.93 as of March 21.
  • The Federal Reserve Bank of Cleveland estimates the trailing 12-month inflation rate will spike from 2.4% in February to 3% in March.

The players

Federal Reserve

The nation's central bank, responsible for setting monetary policy and managing the federal funds target rate, which impacts borrowing costs and economic growth.

Donald Trump

The current President of the United States, whose first non-consecutive term saw the Dow, S&P 500, and Nasdaq Composite soar, but now faces the prospect of a market crash during his second term.

Jerome Powell

The current Chair of the Federal Reserve, whose term is set to expire on May 15, adding to the uncertainty surrounding the central bank's future policy decisions.

Got photos? Submit your photos here. ›

What they’re saying

“If the nation's central bank alters its stance and removes the prospect of additional rate cuts in 2026 and/or 2027, or worse yet, puts the possibility of rate hikes on the table, it could turn into a look-out-below moment for the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite.”

— Sean Williams, Author

“Division within the FOMC threatens to undermine the Fed's credibility.”

— Sean Williams, Author

What’s next

The Federal Reserve's next policy meeting is scheduled for April 30, where the central bank will have to weigh the impact of the Iran war and rising inflation on its dual mandate of maximizing employment and stabilizing prices. Investors will be closely watching for any signals about potential rate hikes or changes to the Fed's dovish stance.

The takeaway

This situation highlights the delicate balance the Federal Reserve must strike as it navigates the complex economic landscape shaped by geopolitical tensions, supply chain disruptions, and inflationary pressures. The central bank's next moves could have far-reaching consequences for the stock market and the broader economy, potentially undermining the gains seen under the Trump administration.