The following is part of a post by Joseph Zeballos-Roig at MS NOW:
The economy is now up against its biggest foe yet: a costly war in Iran, a regional power in the Middle East that just happens to sit next to what is arguably the world’s most critical maritime energy chokepoint.
The blows are already coming. The war is costing the U.S. an estimated $1 billion a day, according to two congressional sources with knowledge of the matter. Oil prices are now forecast to go higher, while gas prices have already jumped to $3.32. It’s the highest price it has reached in either of Trump’s two terms. The situation is so in flux that gas prices are poised to climb higher than that after this article is published.
The knock-on effects of increasingly expensive oil will be felt next. Higher costs for oil and gas will spread to the costs of other goods and services, particularly those relying on trucks for transportation. Higher prices for airline tickets aren’t out of the question. Grocery bills and electricity prices will also follow suit if the war drags on.
The war with Iran almost instantly wrecked forecasts for lower oil prices this year, one of the only slices of the U.S. economy that had been getting cheaper for consumers. Analysts had previously expected Brent crude to trade at about $60 per barrel in 2026. Instead, Brent crude rocketed to $93 per barrel as of Friday due to the conflict.
On Wednesday, Goldman Sachs published a worst-case scenario in which $100 per barrel of oil becomes a reality in five weeks. That was based on whether Iran managed to choke off oil shipments in the Strait of Hormuz, the Persian Gulf waterway near Iran that accounts for one-fifth of global oil and natural gas shipping. It did, and Goldman quickly updated its forecast for oil prices to cross into dreaded triple-digit territory as soon as next week. . . .
The Strait of Hormuz is associated with oil, but it’s also a vital artery for fertilizer transport. Fertilizer prices were already elevated prior to the Iran conflict, dealing a blow to American farmers coping with dwindling markets and lower crop prices. . . .
Many companies spent the past year reshuffling supply chains to avert Trump’s double-digit tariffs. The war is jolting them anew. The top five largest container shipping firms, including Maersk, suspended their operations in the Persian Gulf.
Instead of traveling through the Suez Canal, the companies are sending their cargo fleets around the Cape of Good Hope at the tip of South Africa. The fraught, dangerous environment caused them to add surcharges ranging from $1,500 to $3,500 per container. . . .
If the war in Iran stretches on for months, it will magnify the expected price increases for food, furniture and much more.
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