Donald Gainsborough is a titan of policy and a seasoned political savant currently steering the ship at Government Curated. With a career built on navigating the intersection of legislative strategy and market volatility, he possesses a rare ability to decode the complex signals of the global economy. As the conflict in the Middle East continues to send shockwaves through the energy sector and domestic inflation remains a thorn in the side of the American consumer, Gainsborough provides a much-needed perspective on the administration’s high-stakes gamble. Today, we explore the precarious state of the oil markets, the “insidious” nature of rising costs, and whether the President’s optimistic long-term outlook can survive the immediate pressure of a 4% inflation rate and a blockaded Strait of Hormuz.
With the global oil market missing over a billion barrels and the Strait of Hormuz remaining closed despite military efforts, how do you assess the administration’s ability to stabilize energy costs while storage capacity dwindles to rock bottom?
The situation is undeniably the most severe supply disruption we have witnessed in the modern oil era, and the levers available to the administration are increasingly limited. While we have seen the release of strategic reserves and Treasury Secretary Scott Bessent providing sanctions relief for Iranian and Russian oil sales, these are essentially band-aids on a gaping wound. The physical reality of a closed Strait of Hormuz overrides any fiscal policy, especially since plans for a gas tax holiday never even got off the ground. We are looking at a market that is hemorrhaging roughly 350 million barrels in cumulative losses every single month, and a growing share of that supply is simply never coming back. Even if we see a partial reopening by mid-July, the math remains grim, with total losses potentially reaching 2 billion barrels by the end of the year, leaving regional storage capacity in a state of absolute depletion.
Inflation has crested above 4% for the first time since early 2023, yet the President has famously stated that he “loves” these numbers because they will drop “like a rock” once the war ends. What is the political and economic logic behind this messaging, especially when less than a quarter of Americans approve of the current handling of cost-of-living issues?
This is a high-wire act of political framing, where the administration is betting that the public will accept short-term economic agony in exchange for a definitive victory over Iran. By claiming to “love” the inflation numbers, the President is signaling that he views this as a temporary, war-driven spike rather than a structural failure of his broader economic agenda. However, this rhetoric clashes harshly with the lived experience of voters who are feeling the squeeze in housing, energy, and healthcare, as noted by observers like Senator Dave McCormick. There is a palpable sense of vulnerability for Republicans this fall, particularly because the plan to bring prices down relies entirely on the reopening of the Strait of Hormuz. If the public doesn’t believe that the flow of oil will resume quickly, the “like a rock” promise starts to sound more like a gamble than a strategy, especially with approval ratings on these issues sitting below 25%.
The Federal Reserve appears to be moving in a different direction than the administration anticipated, with a 67% probability of a rate hike by year-end. How does this shift, coupled with 10-year debt yields rising above 4.5%, complicate the President’s goals for long-term growth and infrastructure?
The rise in 10-year government debt yields above 4.5% is a clear indicator that the market’s long-term inflation expectations are heating up, which is exactly the opposite of the outcome the President wanted when he tapped Kevin Warsh to replace Jerome Powell. A hawkish Fed essentially puts a ceiling on the “meaningful results” the administration claims its agenda is delivering. Higher rates will inevitably trickle down into mortgage products and consumer lending, further eroding the purchasing power of the American worker. Moreover, the trillions currently being funneled into data centers and artificial intelligence infrastructure are sensitive to these borrowing costs. If the cost of capital remains high, we may see a cooling effect on the very technological and infrastructure projects that were supposed to be the engine of the next economic era.
Beyond energy, we see significant spending on AI data centers and the looming threat of new tariffs. How do these factors contribute to the “insidious” inflation that working communities are currently facing?
While energy is the primary driver, accounting for the bulk of the recent surge in the consumer price index, it is not acting in a vacuum. The massive capital expenditure on AI and large-scale infrastructure projects creates a significant demand for resources and labor, which naturally pushes prices upward across the supply chain. Senator Dave McCormick described this inflation as “insidious” precisely because it touches everything—from the cost of heating a home to the price of a doctor’s visit. We are also seeing a deterioration in real wages as the war-driven inflation outpaces what people are taking home in their paychecks. Even if fuel prices have dipped by 37 cents per gallon over the last month, the concern is that businesses are currently absorbing higher costs that will eventually be passed on to the consumer in the form of more expensive goods and services.
What is your forecast for the energy market?
My forecast is one of continued, high-stakes volatility, where the price of oil will remain skyward as long as the conflict with Iran shows no sign of a diplomatic resolution. The recent downing of an Army Apache helicopter and the subsequent retaliatory strikes by the U.S. suggest that we are moving toward escalation rather than de-escalation. With Vice President JD Vance indicating that a peace deal could take anywhere from a week to several months, the market is bracing for a sustained period of scarcity. If the Strait remains largely inaccessible, we will likely see that billion-barrel deficit double by the end of the year, forcing a global reckoning with dwindling storage capacity. Until the “free flow of energy” is actually restored, any claims that inflation will drop like a rock remain purely aspirational, and the American consumer should be prepared for a very rocky road through the midterms and beyond.
