Rising gasoline prices amid the U.S.-Iran conflict could fuel inflation and strain the U.S. economy, with Moody's Analytics warning of broader price pressures and economist Peter Schiff predicting the Federal Reserve could respond with more quantitative easing.

Moody's Flags Inflation Risks

Chris Lafakis, director of climate and energy economics at Moody's Analytics, told MarketDash that rising fuel costs were already contributing to broader inflationary pressures.

"Energy was the main catalyst, as gasoline prices surged amid the escalating war in Iran and continued disruptions to global refining capacity," Lafakis said.

The September Consumer Price Index rose 0.6% month over month, while annual inflation accelerated to 3.7%.

Lafakis identified transportation, distribution, airfares, construction and food prices as sectors particularly vulnerable to higher energy costs.

"Household consumption is the front line," he said, explaining that rising energy prices reduce disposable income available for other goods and services. Prolonged increases could weaken business activity and ultimately reduce hiring.

Lafakis said a ceasefire, normal shipping through the Strait of Hormuz and an end to attacks on Middle Eastern refineries could substantially lower fuel prices.

However, further escalation of the U.S.-Iran conflict could restrict global oil supplies and push prices higher.

Peter Schiff Predicts 'More QE' and Higher Inflation

Schiff offered a more pessimistic outlook, arguing that economic weakness could prompt the Federal Reserve to adopt more accommodative monetary policy.

"Rising gas prices themselves won't cause higher inflation, but they will result in higher inflation as the Fed ultimately adopts a more accommodative monetary policy because of higher gas prices," Schiff told MarketDash.

He predicted that higher fuel costs would force consumers to cut spending, increase unemployment and widen budget deficits as government interest expenses rise.

"This means more QE, so higher inflation by definition," he said.

He added, "I don't think anything is likely to cause a big drop in gas prices. If anything, gas prices will rise considerably from here...This is not good for the U.S. economy, the housing market, or the stock market."

Gas Prices and Inflation Remain In Focus

On Wednesday, GasBuddy analyst Patrick De Haan predicted that national diesel prices "will not fall below $6/gal" and gasoline prices "will not fall below $4/gal" before the midterm elections unless tensions between the U.S. and Iran and between Ukraine and Russia de-escalate.

Last week, White House economic adviser Kevin Hassett called September's inflation surge "temporary," despite annual inflation reaching 3.7% and gasoline prices jumping 9.1%.