US Economy Faces Uncertainty Amid Tensions with Iran

US President Donald Trump Declares War on Iran as Oil Prices Spike

A recent escalation in tensions between the US and Iran has led to increased oil prices, with prices spiking above $100 per barrel. The Strait of Hormuz, a critical waterway for global oil supply, remains closed, cutting off oil from the Gulf.

According to experts, the duration and intensity of the conflict will significantly impact the economic pressure on consumers. Rachel Ziemba, an adjunct senior fellow at the Center for a New American Security, stated that if the war lasts more than a few weeks, prices could become higher and more volatile. In contrast, a quick resolution with a credible and stable end could lead to prices normalizing.

The International Energy Agency has described the current conflict as creating the largest supply disruption in the history of the global oil market. Sam Ori, director of the Energy Policy Institute at the University of Chicago, noted that past instances of oil prices reaching 4-5% of gross domestic product have triggered recessions. However, he also stated that the US economy’s dependence on foreign oil is less pronounced compared to the 1970s.

The Gulf, which supplies over one-fifth of the world’s oil, remains closed due to the conflict. The severity of this disruption has led some experts to believe that a resolution is imminent. Ori noted that the conflict has entered a phase where it may be moving out of US control, with countries taking measures to conserve oil.

As a result, petrol prices in the US have increased, with the national average reaching $3.59 per gallon as of Wednesday. Patrick DeHaan, lead petroleum analyst for GasBuddy, stated that an end to the conflict could lower petrol prices within weeks, but warned that each week of continued conflict could lead to further price increases.

Robert Rogowsky, adjunct professor at a university, noted that the indefinite closure of the Strait of Hormuz would have significant implications for the global economy. The situation remains fluid, with experts closely monitoring developments and assessing the potential outcomes.

Source: Al Jazeera