Two months after the conflict with Iran erupted, global markets are in turmoil: gas prices have surged, inflation is rising, and economists are warning of a dangerous economic slowdown.
Sixty days into the Iran war, the United States faces a combination of military stalemate and economic pressure. Gas prices have increased to their highest level in four years — $4.30 a gallon after the largest one‑day rise in weeks — contributing to annual inflation reaching 3.5% in March, according to the Federal Reserve’s preferred measurement.
The increase in energy costs comes at a challenging time. While larger tax refunds and modest wage gains have helped some households, economists caution about the potential for ‘demand destruction.’ This refers to a situation in which continued price increases lead consumers to reduce spending, delay major purchases, and cut back on essentials, potentially affecting the wider economy.
RSM US, a consulting firm, outlines the domino effect: oil spikes act as a hidden tax, confidence collapses, businesses delay investments, layoffs follow, and the Federal Reserve is forced to raise interest rates, deepening the slowdown. If high prices persist, permanent behaviour shifts could take hold — from electric vehicle adoption to remote work and automation replacing human labour.
The geopolitical situation is tense. The Strait of Hormuz remains closed, limiting oil and gas flows. President Trump, after discussions with senior military officials including Adm. Brad Cooper and Gen. Dan Caine, is considering options and has not restarted bombing campaigns. His current strategy focuses on applying economic pressure on Iran related to its nuclear program.
The Pentagon’s estimate for war-related costs is $25 billion. Some analysts have suggested that the total cost could be higher, potentially reaching $200 billion when accounting for base repairs and long‑term commitments.
Friday marks the 60‑day War Powers deadline, a point at which Congress is required to vote on whether hostilities continue. Lawmakers’ opinions differ. Senators Rand Paul and Susan Collins have joined Democrats in supporting troop withdrawal, while others advocate that the ceasefire could allow for a new timeline.
For many Americans, the debate in Washington is less immediate than economic concerns. With rising inflation and increasing energy costs, there is widespread uncertainty about domestic economic stability.