How Iran conflict can impact U.S. economy

Investment Analysis Clubs Macro Economic Trends and Risks
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There is already a long METAR thread about how the Iran conflict can impact the U.S. economy. Others are contemplating this.

https://www.nytimes.com/2026/03/05/business/economy/iran-oil-economy-consumers.html

How War in the Persian Gulf Could Spill Into the U.S. Economy

Rising energy prices, snarled supply chains and higher government debt could all hurt American consumers.

By Lydia DePillis, The New York Times,
March 5, 2026

Three kinds of events have historically pushed the United States into recessions: financial crises, oil price shocks and pandemics.

The U.S. and Israeli attacks on Iran have already brought about the second circumstance on that list and, if things go badly, potentially the first…

In the days after the war began, tankers stopped entering the Strait of Hormuz, which Iran controls and through which 20 percent of the world’s oil is channeled. About 200 ships are stranded in the Persian Gulf region, according to Lloyd’s List, and oil shipping rates have shot up. Saudi Arabia’s largest oil refinery and Qatar’s largest liquefied natural gas export facility shut down after drone attacks.

Oil prices surged and are up about 15 percent since the fighting started, at about $83 a barrel for the international crude benchmark…

Inflation is expected to rise, decreasing the likelihood that the Federal Reserve will cut interest rates in the coming months…

Uncertainty about whether the war will widen and disruptions linger comes as U.S. consumer goods companies are buying raw materials, with an eye toward the Christmas shopping season…

Investors sold off U.S. Treasury bonds after the attacks began, rather than flocking to them as they typically do in times of global instability…

If investors lose confidence in a handful of technology companies’ ability to deliver on their promises, stock markets that have become heavily concentrated in their stocks could take a hit… [end quote]

The bond market is larger than the stock market. As a bond buyer, I look at the maturity of the bond and try to predict inflation and the general level of bond yields years in advance. Federal debt as a share of gross domestic product is already at historic highs and predicted to get much higher. Even TIPS that are protected from inflation will drop in value if interest rates rise later.

Treasury yields are rising because investors are afraid that the Iran attack will turn into yet another expensive quagmire. This will increase the federal deficit even further.

Wendy

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20% of the world’s oil goes through the Strait of Hormuz which is narrow and horse shoe shaped..

NBC News:

Shipping slows to a crawl through Strait of Hormuz, threatening to snarl international trade

Tanker traffic through the Strait of Hormuz on Wednesday had dropped around 90% compared with last week, according to ship tracker MarineTraffic, as oil and gas tankers cluster just outside of the strait.

The US may have US Navy ships escort the tankers.
However:

Iran’s armoury of air defences is believed to have expanded to include “game-changer” anti-ship weapons from Russia and China

Not much room for ship maneuvering in the narrow horse shoe strait. Also the strait does not have much depth. Sinking a tanker or escort might plug the strait.

Meanwhile:
https://www.moneycontrol.com/news/business/economy/indian-refiners-likely-to-pivot-back-to-russian-oil-amid-gulf-tensions-lpg-flows-face-greater-risks-13847080.html
Indian refiners likely to pivot back to Russian oil amid Gulf tensions, LPG flows face greater risks
There is money to be made during this crisis.

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Why haven’t the Saudis built a pipeline from the oil fields to the Arabian sea to bypass the Strait of Hormuz?

The Captain

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It’s a good question. There is a pipeline that does that, but it’s not Saudi owned and has limited capacity.

Even if the US does provide support for going around Hormuz, 1) there’s not enough Navy, and 2) the insurance companies probably won’t accept that as sufficient, which means the ships won’t move for a while.

This is the kind of thing that comes up during “discussions” as opposed to “shooting from the hip” where you sometimes shoot yourself in the hip.

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To Contain Rising Energy Prices

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Ha! I wish that was true in my neck of the woods. $2.65 to $3.19.

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I hope everyone with airline travel planned has locked in their ticket pricing.

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Google Finance is showing Crude Oil up 28% to $116. Oil prices are escalating rapidly.

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Pipelines are an easy target and several have already been hit.

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Gas at the pump in Portugal has not changed recently and is lower than back in Covid time. The Euro seems to be higher now so it’s not just oil but it could be the currency used to pay for it.

The Captain

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I suspect your gas stations are working off old supplies. While some providers will jump the prices right away, others will wait for the prices to come down through their supply chain. It’s only been nine days, after all.

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SA can go to the Red Sea with 5 m bbl/day.

I just filled up this morning at Costco for $3.09

This is going to be far worse than I was anticipating.

All the more reason to default.

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This and the weekend Lindsey’s call for GCC to join the war, shows the same tone deaf-ness. Arab countries have trouble with Iran, but they have not signed up for this war. Israel-US didn’t consult them, and there is a deep anger in the arab world that Israel is dragging US and GCC into this war, which they are very clear, not going to get involved.

Asking why you haven’t prepared for a contingency when that risk is something US creates, is pretty tone-deaf. What average Americans don’t understand is, the deep anger of the world towards America. People are pretty angry at US, more than Israel, because they see US enables Israel. Why because average people’s lives are drastically impacted by this war, and the raising Oil prices.

The best we can do is, not question others choice, when our choices are so dumb.

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The US does not want boots on the ground. Most of the Iranian public is with Israel/US, but a ground war would turn them against us. This is only about the regime’s leaders. The Arabs are very jealous of power between SA and Iran. This is more complex.

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“They will welcome us as liberators” The west doesn’t learn.. the arrogance that people are waiting for Israel to come and liberate, even after what happened in Gaza, the western mindset is full of arrogance and hubris.

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…and a huge constipatedly stuck “uck” of stolid self-glorifying and egotistical stoopidness.

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Here is one area that will impact USA economy:

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Google query AI

Iranian perspectives on the current conflict are deeply divided, ranging from intense hope for regime change to profound fear and anger over violence and instability. While many in the diaspora and some inside Iran see the war as a, “rescue mission” to overthrow the regime, others are terrified by the destruction, death, and potential for a long-term, ruinous war.

[image]YouTube +3

Here is a detailed breakdown of the emotional, complex reactions:

  • Hope for Regime Change: A significant number of Iranians, both inside and outside the country, feel extreme animosity toward the Islamic Republic. For them, the strikes are viewed as a necessary, albeit painful, action to liberate the country, often described as a, “small light at the end of the tunnel”.
  • Fear and Despair: Many others are experiencing immense, “shock and anger,” describing the situation as, “truly terrifying”. There is significant concern about the destruction of infrastructure, civilian casualties, and the potential for a catastrophic, long-term war.
  • A “Mixed” Reality: Many Iranians occupy a middle ground, experiencing a conflict of emotions: they may dislike the regime but fear foreign intervention and war. A commonly expressed sentiment is, “We laugh and are happy when the regime is hit, but when children die and our infrastructure is destroyed, we worry about the future of our country”.
  • Shifting Sentiments: Early, “over the moon” excitement among some over strikes on leadership has, for some, faded into exhaustion and anxiety as the conflict continues, with some simply wishing for, “peace everywhere”.
  • Regime Supporters: There remains a segment of the population, particularly among conservative or rural groups, that supports the regime and opposes the war.

[image]NBC Boston +6

My comment, the goodwill disappears if we put boots on the ground. Marines only shoot first and don’t ask questions.

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So is the rest of the world. It would be interesting to read a denial of that.

We are called human beings. We aren’t worth much. But we think we are.