White House says war’s economic impact won’t last. Analysts disagree
The White House may call it a “skirmish,” but the war in Iran is already creating a growing impact on the U.S. economy, and some economists and business leaders say the effects may outlast the fighting itself.
The White House argues the economic disruption will be temporary. President Donald Trump predicts gas prices will come down once the war ends and the Strait of Hormuz reopens.
But analysts cited by Politico said damaged infrastructure disrupted energy flows in the Middle East, along with supply-chain decisions being made now, could keep some costs elevated well beyond any ceasefire.
Why economists say the price shock may last
The war’s effects go beyond gasoline prices. Politico reported that the fighting, which began at the end of February, is putting pressure on housing, farming, plastics and transportation. Analysts warned that some of those costs could keep moving through the economy after the fighting stops.
“I don’t think we’re going back to the pre-war prices for the foreseeable future,” Mark Zandi, chief economist at Moody’s Analytics, told Politico. “Certainly won’t be this year, won’t even be next year. Might not be ever.”
Last week, the average rate for a 30-year mortgage climbed back to 6.4% after dipping below 6% before the war. Diesel prices, meanwhile, are heading toward record highs, and fertilizer costs have surged.
In his annual letter to shareholders, Jamie Dimon, the chairman and chief executive of JPMorganChase, struck a cautionary tone that contrasted with the White House’s public messaging. Dimon wrote that the war in Iran could bring “significant ongoing oil and commodity price shocks,” reshape global supply chains, contribute to “stickier inflation,” and lead to “ultimately higher interest rates than markets currently expect.”
Where Dimon and the White House diverge
The administration argues that the economy can absorb the shock. Politico reported that White House spokesman Kush Desai pointed to a March jobs report showing roughly 178,000 jobs added and said the country “remains on a solid economic trajectory.”
Desai also said the administration expects disruptions from the war to be short-lived, arguing that tax cuts, deregulation, energy dominance, trade deals and investment commitments will support faster growth once the military campaign’s objectives are achieved.
White House adviser Kevin Hassett made a similar case on Fox News, saying Trump’s policies had made the U.S. economy resilient enough that it could not be derailed by what he called a temporary Middle East “skirmish.”
Dimon’s letter laid out a darker set of possibilities. He wrote that a “bad confluence of events” can lead to recession, high credit losses, volatile markets, lower asset prices and higher unemployment and said some scenarios could produce a recession with inflation or stagflation.
He also warned that inflation “slowly going up” could by itself push interest rates higher and drag asset prices lower.
Where higher costs are already showing up
Rising commodity costs are already affecting business decisions.
In farming, higher urea prices are forcing changes in planting decisions, especially for corn, which requires heavy nitrogen inputs. The American Farm Bureau Federation said the closure of the Strait of Hormuz drove up both urea and diesel costs just as planting choices had to be made. Economist Ricky Volpe told Politico the result would likely be at least a short-term increase in food and agricultural prices.
Petrochemicals are another pressure point. With U.S. crude futures exceeding $110 a barrel, companies are having to make sourcing decisions that will shape prices for weeks and months to come. Jim Fitterling, Dow’s chair and CEO, told Politico the disruption could create supply-chain policies similar to those of the COVID-19 era, lasting 250 to 275 days.
Trump has said the war could end within two to three weeks. Analysts, however, argue that even a fast end would not quickly reverse the economic effects already in motion.
Fertilizer shipments, for example, take 30 to 45 days to reach the United States by vessel, according to Politico, and American buyers would still be competing with India and Europe for supply.
Ella Rae Greene, Editor In Chief
