The war in Iran is already having a profound impact on the wallets of U.S. citizens. Gas prices have skyrocketed over the last month, with no sign they’ll be coming down anytime soon. As the war in Iran continues to disrupt oil supplies and shipping routes, several economists have warned that a prolonged conflict in Iran could lead to a recession within a year.
According to CBS News, economists at Goldman Sachs estimate that the increase in oil prices could also increase U.S. inflation by 0.2 percentage points to 3.1% by year’s end, placing a further drag on consumer spending. During an Australian news conference, Fatih Birol, the leader of the International Energy Agency, said that the disruption the Iran War has caused in the international oil supply is worse than the 1973 and 1979 oil crises combined. As a result of that disruption, Goldman Sachs currently estimates a 30% chance of recession within the next year.
Fortune reports that Moody Analytics raised its estimate of a recession to 48.6%, even higher than the Goldman Sachs prediction. “Even before the conflict, I thought recession and risks were on the rise,” Moody’s Chief Economist Mark Zandi said in an interview with CNBC on Wednesday. “Recession risks are very high—and unless the hostilities are coming to an end now, the president figures out a way to stand down, declare victory and move on, and Iranians follow suit—I think recession is more than likely by the second half of the year.”
Now, if you’re making less than six figures, it probably feels like we’ve been in a recession for the last few years. Economists have called our current situation a “K-shaped economy,” which effectively means the rich get richer and the poor get poorer. The United States economy has largely been propped up by high earners who have continued spending like nobody’s business. “If they cut back on spending, it could push the economy into a recession,” PNC Financial Services Group chief economist Gus Faucher told CBS News.
“If you’re a consumer, you may want to hold off on making a big purchase because you’re not sure how the economy is going to look a few months from now,” Faucher added.
The conflict in Iran has affected various sectors of the U.S. economy. The most obvious has been gas prices, which have risen to an average of $3.68 nationwide, up an entire dollar from the month before the war began. The cost of diesel, which is used in farming and trucks that ship goods, has risen even more dramatically from $3.75 a month ago to $5.37 as of this writing.
In Arizona, I’m currently paying $4.99 a gallon for gas. While my financial situation is decent enough that I’m not having to skip meals to make it work, that’s not the case for a growing number of Americans.
Beyond the price of gas, the Iran war is also impacting the cost of food. Much of the world’s fertilizer supply passes through the Strait of Hormuz, which has effectively been closed during the duration of the war. The shortage in fertilizer will likely result in less food being produced, which will inevitably increase prices.
Not helping matters is that the U.S. economy was already in a bit of a slump before the war started. The whole reason President Donald Trump was re-elected in 2024 was largely due to the cost-of-living crisis. The job market was already bad, and an abysmal February jobs report showing that 92,000 jobs were lost didn’t exactly inspire confidence. With unemployment going up and prices alongside it, it paints a particularly dire picture for the U.S. economy.
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