One big nonmilitary question has loomed over President Trump's attacks and now cease-fire in Iran: Would the U.S. economy take a hit from a prolonged war?
Since earlier this year, the president and advisers have been privately hearing from cabinet officials, political allies and corporate leaders about what the war could do to Wall Street and Main Street if it didn't conclude within a tight time frame. Many cautioned against -- or drew up scenarios for -- a more-extended fight.
Treasury Secretary Scott Bessent spoke with Trump about the market reaction and the U.S. economic trajectory as it related to the length of the war, according to people familiar with the matter. Bessent and the president discussed various measures the Treasury could take if the war went on for eight to 12 week and how the U.S. could be vulnerable to a potential rise in gasoline prices, these people said. Bessent told the president that he believed Asia and Europe would be the areas most vulnerable to rising energy prices from the war.
Last month, the Treasury Department issued a short-term authorization permitting the sale of Iranian oil already at sea.
National Economic Council Director Kevin Hassett advised Trump on the potential impact on the U.S. economy, according to a senior administration official.
White House spokesman Kush Desai said the administration has been working with business representatives on how to lessen the blow. Trump "has been clear about short-term disruptions" from the war, and the administration "has been diligently working with the private sector to mitigate these disruptions," Desai said.
The president is known to monitor the stock market and the state of the economy regularly while he contemplates policy decisions. After the U.S. launched its attacks in late February, Trump has offered different comments on how quickly he wants to end the fighting.
Consumer prices were up 3.3% in March compared with a year earlier, the Labor Department said Friday, steeper than February's gain of 2.4%. Oil prices shot to above $100 a barrel before retreating, and gasoline prices have risen to above $4 a gallon. The stock market sank and then recovered, often reacting to Trump's comments on the war.
JPMorgan Chase Chief Executive Officer Jamie Dimon said in a recent letter to shareholders that if the war continued there would be "significant ongoing oil and commodity price shocks, along with the reshaping of global supply chains, which may lead to stickier inflation and ultimately higher interest rates."
There have been private admonitions as well. In recent weeks, according to people familiar with the matter, the CEOs of the three largest U.S. oil companies warned Trump administration officials including Energy Secretary Chris Wright and Interior Secretary Doug Burgum. The executives said that a prolonged closure of the Strait of Hormuz, an artery for 20% of the world's daily oil and liquefied natural gas supplies, could sharply squeeze global fuel supply chains and that the energy crisis could worsen.
Financial markets didn't fully grasp the severity of the constraints in the physical flow of oil, said Chevron CEO Mike Wirth at an energy conference in Houston last month. At the conference, Wright and Burgum told oil executives that the traffic snarl in the strait would be resolved within weeks, rather than months. Some executives privately expressed frustration with the administration's optimistic message, adding that the uncertainty hanging over the conflict made it impossible to plan investments.
A White House official said Trump's energy team is in constant communication with U.S. oil and gas executives. After the war began, administration officials began discussions with oil executives to limit supply disruptions and enable increased production.
Steve Moore, a longtime economic adviser to Trump, told the White House in March, according to a person familiar with the matter, that if the U.S. pulled out of Iran within a month of the start of the war and the strait reopened, oil prices would retreat back to about $70 a barrel. Moore was said to be concerned by what he was seeing from a rise in oil and gas prices.
Brooke Rollins, Trump's agriculture secretary, told farm lobbyists recently that their concern about the rise of fertilizer prices related to the strait's closure would be brought directly to the president, according to Caleb Ragland, the chairman of the American Soybean Association, an organization he said was in touch with Trump aides about their concerns.
"Our point is this is kind of an emergency for our farmers, and we need that supply to be open," Ragland said in an interview. He said the farmers' message to Rollins and other administration officials was similar to that of others making the case about the economy: The war shouldn't be prolonged.
About half of the global supply of urea -- a nitrogen-based fertilizer -- and almost a third of the ammonia supply typically flow through the strait, according to the American Farm Bureau Federation. Rollins didn't return a request for comment.
Others have weighed in as well. As White House officials were preparing a February trip to Texas for Trump to discuss the administration's efforts to curtail oil and gas regulations, they received an email from an longtime industry ally, Matt Coday, the president and founder of the Oil & Gas Workers Association.
Coday relayed the story of a woman who he said fled Iran because of its oppressive regime. He said in an interview that it was time to use military force to overthrow Iran's leaders and that he wasn't convinced there would be major consequences to the U.S. economy. "This is a temporary blip," Coday said about rising gasoline prices related to the war.
Comments