The US economy is starting to crack under stacked pressure

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Analysis: A new oil shock is building. The next few weeks of war will be decisive for the economy.

The clock is ticking on the U.S.-Israeli war in Iran. The emerging view from oil industry executives and analysts is that the economic and market fallout from the war could escalate sharply if the Strait of Hormuz isn’t reopened within roughly the next one to three weeks. Even then, enough damage may have been done already to leave energy and many other prices higher for longer.

These risks haven’t been clearly reflected in some widely followed markets, including stocks broadly and the benchmark Brent crude price
. Stopgap measures to soften the blow of the oil cutoff have kept crude prices relatively low in the U.S. and European markets. But when those measures lose their effectiveness in early-to-mid April, analysts warn there will be little the U.S. or other governments can do to keep energy prices from rising dramatically.

Consumers caught in triple stack of pain

Americans desperately want day-to-day life to be more affordable. Right now, they aren’t getting it.

The big picture: The pinch of high prices for food, energy, housing and more has driven seismic shifts in public opinion over the last four years. Since the onset of the Iran war, the cost of living looks likely to get worse, not better, at least in the near term.

Energy prices are surging, interest rates are on the rise, and the stock market is looking wobbly — a triple whammy for U.S. households.
By the numbers: The national average for a gallon of gasoline is poised to surpass $4, up from about $3 a month ago — and is set to rise further the longer the Strait of Hormuz remains blocked.

Even before the latest energy shock, electricity prices were up 4.8% over the last year, and piped natural gas up 10.9%.
Higher energy prices will also likely show up in more expensive airfares and in shipping costs that could ripple through all sorts of goods.
Grocery prices are up 3.9% over the last year, and Iran’s blockade is throttling the global supply of fertilizer, which could create new pressures on food prices come harvest season.
Of note: The impact of higher gasoline prices alone may roughly offset higher anticipated tax refunds due to last year’s One Big, Beautiful Bill Act, per analysis from Stanford economists.

Driving the news: The Organisation for Economic Co-operation and Development this week projected U.S. inflation will reach 4.2% this year. Before the war, the international research and policy group had projected 3% U.S. inflation.

That is lower than the inflation rate reached in 2022, the peak of the post-pandemic supply chain snarls and the Ukraine war’s impact. But 4%+ inflation would come on top of five consecutive years of elevated inflation — consumer prices are up 25% since December 2020.
And the job market is much weaker now than it was in 2022, with less hiring and smaller pay increases to help offset higher costs.
It’s not just professional forecasters, either. In the University of Michigan consumer sentiment survey released Friday, respondents’ expectations for inflation over the next year soared to 3.8% in March from 3.4% in February.

Is Trump losing his grip on the stock market? Sustained declines suggest the president’s influence has waned.

Investors’ belief in Trump’s eagerness to de-escalate the Iran conflict has kept the stock market from even larger losses in March, Steve Sosnick, chief strategist at Interactive Brokers, told MarketWatch. Still, as the conflict drags on, some have started to worry there’s no end in sight.

“Psychologically, it’s draining,” said Carol Schleif, chief market strategist at BMO Wealth Management, in a phone interview Friday. “Markets are grappling with the fact that they expected this to be over on short order.”

Recently, some have even begun to wonder whether Trump’s ability to reassure investors by telling them what they want to hear might be starting to wane.

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