War in Iran only adds to U.S. economic challenges
By Clive Crook / Bloomberg Opinion
President Trump’s extraordinary gamble in attacking Iran and risking a wider conflagration in the Middle East dials up the economic hazards facing the U.S. economy from “very high” to “extreme.” The point is, this new stress compounds a series of other severe pressures already facing the economy, which is now even more unlikely to emerge unscathed.
The immediate danger is a setback in financial markets that gets out of hand. In many ways, some such reversal was already overdue, given the apparent overvaluation of U.S. equities, the weight that the administration’s tariffs had already put on the economy’s back, a still-deteriorating fiscal outlook and a stubbornly persistent rate of inflation. Now let’s add the possibility of spiking energy prices, interrupted trade flows and global political turbulence.
Last week’s new inflation numbers were already cause for concern. The core producer price index, which excludes food and energy, increased by 0.8% in January, markedly higher than expected. Its main components feed into the Federal Reserve’s preferred metric, core PCE (Personal Consumption Expenditures) inflation. That’s running at 3% in the year to December, still much higher than the Fed’s 2% target. On Monday the Institute for Supply Management supplied more such evidence: It said the price of manufacturing inputs is rising at the fastest rate since 2022.
New inflation due to surging energy prices would arrive on top of this already-troubling prospect. Energy prices rose as the strikes on Iran began, and analysts are contemplating oil at well over $100 a barrel, up from $65 before the offensive. As always, there’s a reassuring best-case scenario: If all goes well, a quick campaign followed by the arrival of a new government in Tehran might lift the threat of future conflict and improve confidence in the global energy infrastructure, which could bring oil prices lower than they were before. But if the conflict continues and widens, energy infrastructure comes under sustained attack and the Strait of Hormuz is shut down, $100 a barrel might be decidedly optimistic.
https://www.heraldnet.com/2026/03/10/comment-war-in-iraq-only-adds-to-u-s-economic-challenges/