The economic risks created by the war in Iran will only grow as it drags on, adding to pressure on the Trump administration to bring it to a conclusion.
The war in the Middle East has already caused problems for U.S. commerce, primarily by raising gas prices and mortgage rates, burdening households and voters who were already discontented with the economy and affordability before the war began.
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The war has gone on for over a month now, putting a wrench in global supply chains, especially by effectively closing one of the biggest chokepoints for trade worldwide: the Strait of Hormuz.
“The longer the supply chain disruptions go on, the greater risk that has for the global economy — and the U.S. is not isolated from that,” Mark Hamrick, senior economic analyst at Bankrate, told the Washington Examiner.
The most immediate and noticeable economic ramification of the war so far has been that gas and crude oil prices have soared.
The higher prices at the pump have been hard for families who just suffered through years of high inflation. They are a political problem for President Donald Trump, for whom lower gas prices had been a major positive development to tout.
In mid-January, the average price of a gallon of all of U.S. gas formulations hit a recent low of $2.78, according to the U.S. Energy Information Administration. As of late March, that has shot up to just about $4 per gallon. That marks a remarkable 44% increase in such a short period.
While prices rose quickly, they also might not plunge back to pre-war levels right away.
“Prices tend to rise much more quickly than they fall,” Hamrick said.
But the longer the war persists, the longer that prices at the pump will be higher for consumers, and the more frustrated people will get. It would be a political liability for Republicans if gas prices remain at such high levels as the midterm elections approach.
“High gas prices are never good news for incumbents,” said Peter Loge, director of the George Washington University’s School of Media and Public Affairs. “Gas prices are going up, that’s bad news for incumbents.”
The war has also raised uncertainty in global financial markets.
“Markets are bouncing around, gas prices are bouncing around, and uncertainty is bad for incumbents,” Loge told the Washington Examiner.
Ryan Young, senior economist at the libertarian Competitive Enterprise Institute, said that even if the war were to end soon, some of the upward pressure on energy prices might persist for some time.
“Even if we were to end the war today, energy prices would likely stay higher for at least another year,” Young told the Washington Examiner. “Some of the damage already done to those oil fields can’t be fixed overnight.”
Negotiations with Iran have so far been fruitless. And even if a truce or some form of ceasefire is reached, the risk of the conflict reigniting might persist.
“Frankly, as long as there’s a risk of war, a lot of the oil companies would not be willing to put their workers potentially in harm’s way,” Young said.
And higher oil prices might begin to show up in higher prices beyond gas.
Philip Luck, director of the Center for Strategic and International Studies’ economic department, said that oil, natural gas, and derivatives are in “just everything” that people consume. He pointed out that plastics are derived from oil and that most of the world’s helium comes from the Persian Gulf region.
Food, too, might become more expensive if the cost of transportation increases.
Hamrick pointed to rising costs of diesel fuel, jet fuel, and gasoline, noting that “those will be having impacts on the prices for food and everything that is transported, whether it’s by airplane, automobile, or by commercial truck.”
The most closely watched inflation gauge, the consumer price index, will be released on Friday. Most economists expect inflation to increase a full percentage point in March alone — an enormous increase that would drive annual inflation from 2.4% to 3.4%.
Higher energy prices raise the risk of higher inflation for longer.
“Energy is the lifeblood of the economy — so I’d say the biggest difference between a short war and a longer war in Iran would be, is this going to be just a spike with some after effects that last a year or a little bit longer?” Young said. “Or are we really going to have another 1970s-style situation?”
Mortgage rates have also risen quickly since the outset of the war, further hurting housing affordability.
As of Monday, the average rate on a 30-year fixed-rate mortgage has risen to 6.43%, according to Mortgage News Daily, which tracks rates daily.
That is up significantly from February, just after Trump announced that the government would buy $200 billion in mortgage bonds to lower rates. In that month, rates fell below 6% for the first time since 2022, according to Freddie Mac, which tracks rates weekly.
A big part of that rise is because of the war and concerns about its impact on inflation.
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The economic fallout from a protracted war would be a serious political problem for the GOP.
“The longer it goes, the worse it is for Republicans, for incumbents, because you’re not talking about things Republicans want to be talking about, which is housing policy, any advances in immigration, Artemis,” Loge said.
