The war with Iran is complex, but the reason why the Middle East conflict matters to your financial well-being comes down to three simple facts.
Oil prices will remain high until the Strait of Hormuz is reopened.
The longer this war drags on, the higher your prices will rise.
A prolonged conflict poses a significant threat to the economy and jobs.
Here’s what you need to know:
There’s only one thing the oil market cares about: getting the Strait of Hormuz reopened. Everything else is noise.
Want proof? On Thursday, one day after 32 nations announced they’d release a record 400 million barrels of oil onto the market, oil rose above $100 a barrel. It had stayed below that level since President Donald Trump said on Monday that the war would end soon.
That prognostication now appears wildly optimistic.
Iran remains in control of the strait, the narrow waterway through which 20% of the world’s oil travels. In the first public message attributed to Iran’s new supreme leader, Mojtaba Khamenei, since assuming the role, he said Thursday that the Strait of Hormuz would remain closed as a “tool of pressure.”
US Energy Secretary Chris Wright told CNBC Thursday that it would be weeks before the US Navy was able to begin escorting oil tankers through the strait.
While international oil tankers remain stuck in the Persian Gulf, Iran faces no such constraint – it has kept its own oil flowing through the strait since the conflict, because its ships are the only ones that can transit. That means it can wait this out without sacrificing much oil revenue, while its foreign adversaries struggle with potentially massive economic disruption.
Even if the war ended today, it could take 1 to 3 months to get the strait operational again, according to Homayoun Falakshahi, lead crude research analyst at Kpler. It will take time to clear the hundreds of ships waiting for safe passage and for major oil producers to fix damaged facilities, ramp up production and get oil moving again.
The longer this goes, the higher your prices get. Plain and simple.
Oil could rise to $150 a barrel if the strait isn’t reopened, according to Jay Hatfield, CEO and founder of Infrastructure Capital Advisors.
As oil prices rise, gas is marching toward $4 a gallon. That will cost you at the pump when you fill your car.
Diesel is heading toward $5 a gallon. Trucking companies that carry all the stuff you buy will start adding fuel surcharges. Some, including FedEx, already are.
Companies probably won’t be eating that cost — they’ve already been paying Trump’s tariffs, and there’s little appetite for more profit shaving. JPMorgan estimated consumers would bear 80% of tariff costs this year for that reason.
Prices for perishables – dairy, fruits, vegetables, fish – will rise first. Airfares could come next. But, eventually, if fuel prices remain high, many goods that are transported on a truck, plane or ship will go up in cost.
The US economy is healthy, but it has been on shaky ground: Since May of last year, the economy has lost 19,000 jobs.
Major oil price shocks always result in reduced economic output. See: the 1973 oil crisis, the 1990 Gulf War oil shock, the 2008 global financial crisis. A prolonged price shock could scare businesses into layoffs, send the market tumbling and reduce consumer spending (which drives two-thirds of US economic output).
The last time oil surged – after Russia invaded Ukraine in 2022 – the US job market was booming. That’s not the case this time. Businesses have already been on edge about tariffs and AI. Now they have to deal with a price shock.
That’s why Goldman Sachs economists this week increased their forecasts for inflation and unemployment and raised their risk of recession this year to 25%, up from 20%.