Over the past year, the U.S. economy has demonstrated surprising resilience, weathering a chaotic trade war, labor supply shocks, and significant stock market volatility. It has also handled the global oil shock far better than most other regions.
Prior to the outbreak of hostilities with Iran, the U.S. economic foundation was solid, with strong consumer spending, a trend towards lower interest rates, and the stock market reaching record highs. Gasoline prices were below $3 per gallon.
However, the U.S. economy is not entirely immune to the Iran conflict. Gasoline prices have now surged, putting pressure on inflation-weary American consumers and businesses heavily reliant on fuel. Analysts warn of potential shortages in fertilizers essential for agriculture, and helium, a critical material for medical devices and chip manufacturing. Europe's struggles are also significant for the U.S.; as the European economy falters, foreign customers for American goods and services may lose purchasing power.
The critical question is the duration of this economic strain.
If the conflict, which began on February 28th, concludes within a few more weeks, falling gasoline prices could later provide a favorable economic condition. Conversely, if tensions persist for months, economists will grow concerned about the potential for slowed growth or even a recession.
The U.S. President stated in a prime-time address that military objectives would be achieved "soon," vowing a "very heavy hit" on Iran within two to three weeks. Following this, U.S. stock markets closed largely flat, while crude oil futures prices rose sharply.
America's role as a major oil producer provides a buffer against physical shortages but offers little protection on price, as oil is traded on a global market. Some economists suggest that if high gasoline prices persist for several more weeks, they will begin to impact U.S. economic momentum. They argue that sustained high fuel prices and supply chain disruptions over months could halt growth entirely or trigger a recession.
The U.S. West Coast is particularly vulnerable to spillover effects from the Middle East. Nearly 18% of California's crude oil imports originate from the Persian Gulf, unlike other importing states that source primarily from Canada and Latin America. The largest oil company in California indicated that shipments of gasoline, jet fuel, and other refined products could become scarcer as early as May or June.
Furthermore, farms, hospitals, and chip factories rely on cargo shipped through the Strait of Hormuz. Sharp price increases and reduced availability of fertilizers like urea could affect crop yields in coming seasons. Qatar accounts for about 35% of global helium supply, a vital coolant for MRI machines and semiconductor manufacturing. Industry experts warn that a disruption of Qatari supply for another four to eight weeks could hinder production of high-end chips.
The chief economist at a major firm stated that if the Strait of Hormuz remains closed for another four to six weeks, she would become genuinely concerned about a recession, citing rising gasoline prices and growing shortages of other raw materials.
The national average price for regular gasoline has swiftly surpassed $4 per gallon, hurting lower-income consumers. The price of diesel fuel, crucial for trucking, has risen 47% since the conflict began, exceeding $5.50 per gallon.
Even if the conflict ends within two to three weeks, the U.S. economy will not quickly return to its pre-war trajectory. Iran still controls shipping through the Strait of Hormuz—a passage for about 20% of globally traded oil—and damaged oil infrastructure in the region could take years to rebuild. Additionally, fuel price spikes may persist as businesses are often slow to lower prices after costs decline.
From an engineering perspective, shutting down oil wells is typically easier than restarting them. One industry analyst recently estimated that oil production would require two months to normalize after the conflict ends.
Another chief economist cautioned against conflating the end of hostilities with the immediate restart of production and refining capacity in the Gulf, noting a return to pre-war oil prices is highly unlikely.
The longer the conflict lasts, the greater the economic cost. A research report noted that if the current "stress test" concludes within two to three weeks, the economy and corporate profits should continue to grow.
Some economists suggest that if the conflict continues into June or early July, U.S. economic conditions could deteriorate. Others believe such effects might not materialize until the autumn or later.
Economists state that in such a scenario, persistently high gasoline prices, further financial market losses, and shortages of other goods would broadly pressure consumer spending. Lower-income households are least able to absorb higher fuel costs, with some individuals already reporting cuts to road travel and discretionary spending.
Consultancy data indicates the Middle East accounts for roughly 20% of global ammonia trade and 38% of global urea trade, both being widely used nitrogen fertilizers.
Although Middle Eastern supply comprises only about 21% of U.S. nitrogen fertilizer imports, fertilizer prices have surged since the war began and could rise further if it continues, especially if major importers like India and Brazil compete more aggressively for limited supplies from outside the region.
A farmer from southeastern Nebraska expects his diesel costs for the planting season to be $4,000 to $5,000 over budget. He reported spending $50,000 more on fertilizer for his cornfields over the past 30 days compared to last year, questioning the broader economic impact of such cost increases.
Some U.S. firms might increase oil and gas production for export, a potential economic positive. However, such decisions could take months as executives seek confirmation that high prices will be sustained.
A more likely scenario is an overall reduction in U.S. exports, as a prolonged conflict could push parts of Europe and Asia into recession, reducing global demand for key U.S. exports like pharmaceuticals, computers, and aircraft parts.
An economist noted that while trade constitutes only 10-15% of GDP, a 5-10% drop in export demand would represent a significant shift.
The same economist argued that the economic benefit from tax rebates in a recent fiscal package has been offset by soaring fuel prices, diminishing the stimulative effect of the package's business investment incentives.
Considering the impact of the Iran conflict, some economists have already lowered their 2026 U.S. growth forecasts.
A managing director at a major investment firm said their firm has reduced its U.S. growth forecast by 0.3 to 0.4 percentage points, based on the assumption the conflict will be brief. A chief economist, who initially projected 2.6% GDP growth for 2026, now expects only 1% growth, and that is contingent on the Strait of Hormuz reopening promptly.
The president of a research firm believes the conflict will end quickly, causing only a temporary inflation spike. However, he does not rule out a prolonged war leading to severe shortages of oil and other commodities, potentially triggering layoffs. He and other economists noted the potential for a return to a 1970s-style environment of persistent inflation and stagnant growth, stating that the longer the conflict lasts, the more it resembles that era of stagflation, making the situation entirely unpredictable if it extends beyond six months.
