How the Oil Shock Could Cancel Out Consumers’ Savings From Trump’s Tax Bill

The Iran war has raised oil prices, and a sustained spike could overshadow Americans’ tax savings from Donald Trump’s “One Big Beautiful Bill,” a strategist said this week.

Tavis McCourt, an institutional equity strategist at Raymond James, said he saw one hypothetical bear-case scenario from oil’s recent price surge that could levy a big consumer tax on Americans, who are now already paying higher prices at the pump since the war started.

In McCourt’s bear case, crude prices sustain a $20-a-barrel rise for at least a year, resulting in an increase to gas prices that would be equivalent to Americans paying an extra $150 billion a year, he told Business Insider.

That increase tops the amount of expected tax cuts this year from Trump’s landmark budget bill, McCourt said, citing an estimate from the Congressional Budget Office.

“The consumer has this tremendous amount of fiscal stimulus this year in tax rebates. So we’re getting a bit of an offset, a $150 billion offset,” McCourt told Business Insider of his hypothetical, though he said that it wasn’t his baseline expectation.

McCourt said he derived the potential impact of higher oil prices from the fact that Americans spend an average $400 billion a year on gas. A $20 increase in the price of oil per barrel — equivalent to a 38% increase from where oil prices were prior to the start of the US-Iran war — would imply gas spending rising to $550 billion a year.

The good news? Oil prices are already starting to simmer down after Trump suggested the war with Iran could be nearing an end on Monday.

Brent crude, which was edging toward $120 on Sunday night, traded around $87 a barrel on Tuesday. It’s a $15 increase from where Brent traded the day before the US and Israel first struck on Iran, under McCourt’s threshold for a sustained spike to offset Trump’s tax cuts for consumers.

Historically, oil price shocks have only lasted several months before crude cooled off, McCourt said, pointing to short-lived spikes in oil following the first Iraq war in the 1990s and after Russia invaded Ukraine in 2022.

That suggests McCourt’s bear-case scenario is unlikely, though he noted the outlook for crude prices going forward was still largely uncertain.

“I wouldn’t believe anybody who had a forecast. I think we’re into the unknown at this point,” he said.