The Iran war is already having a significant impact on the wallets of US citizens. Gas prices have risen over the past month, with no signs of slowing down anytime soon. As the war in Iran continues to disrupt oil supplies and shipping lanes, several economists have warned that prolonged conflict in Iran could lead to a recession this year.
According to CBS News, Goldman Sachs economists estimate that the increase in oil prices may also increase US inflation by 0.2 percent to 3.1% by the end of the year, which will put more pressure on consumer spending. At a press conference in Australia, Fatih Birol, head of the International Energy Agency, said that the disruption caused by the Iran War to international oil supplies is worse than the oil crises of 1973 and 1979 combined. Because of that disruption, Goldman Sachs currently estimates a 30% chance of a recession within the next year.
Fortune reports that Moody Analytics has raised its recession forecast to 48.6%, even higher than Goldman Sachs. “Even before the crisis, I thought the recession and risks were increasing,” Moody’s Chief Economist Mark Zandi said in an interview with CNBC on Wednesday. “The risks of a recession are very high – unless the hostilities end now, the president finds a way to stand up, declare victory and move on, and the Iranians follow suit – I think a recession is more likely than the second half of the year.”
Now, if you do less than six figures, it probably feels like we were down a few years ago. Economists have called our current situation a “K-shaped economy,” which means the rich will get richer and the poor will get poorer. The United States economy is largely supported by high income earners who continue to spend like nobody’s business. “If they cut spending, that would cause the economy to go into recession,” PNC Financial Services Group chief economist Gus Faucher told CBS News.
“If you’re a buyer, you might want to hold off on buying a lot because you’re not sure what the economy is going to look like a few months from now,” Faucher added.
The Iran conflict has affected various sectors of the American economy. The most obvious thing has been the price of gas, which has risen to an average of $3.68 across the country, up by a whole dollar since the month before the war began. The cost of diesel, used in agriculture and trucking, has risen further from $3.75 last month to $5.37 as of this writing.
In Arizona, I now pay $4.99 a gallon for gas. While my financial situation is good enough that I don’t have to skip meals to work, that is not the case for a growing number of Americans.
Apart from the price of gas, the war in Iran also affects the cost of food. Most of the world’s fertilizer supply goes through the Strait of Hormuz, which has been effectively closed during the war. Fertilizer shortages can lead to food shortages, which will increase prices.
It didn’t help matters that the American economy was already collapsing before the war began. The reason President Donald Trump was re-elected in 2024 was largely because of the cost of living crisis. The job market was already bleak, and January’s dismal jobs report showing 92,000 jobs lost did little to boost confidence. With rising unemployment and prices around it, it paints a very grim picture for the US economy.
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