The United States and Israel began bombing Iran on February 28 and Tehran retaliated by blocking traffic in the Strait of Hormuz, a waterway used to carry a fifth of the world’s oil and gas deliveries.
Oil shipments through the strategic Strait of Hormuz have slowed dramatically during the conflict, tightening global energy supply. Photo / Getty Images
Despite being the world’s top producer of crude oil, the United States also felt the pain, as prices at the petrol pump shot up.
A gallon (3.8 litres) of regular petrol costs an average of US$4.15 ($7.10) in the United States, compared with about US$3 just before the war.
The Trump administration, elected in part on a promise to quash inflation, maintains the war’s economic disruptions will be temporary.
Reacting to the data out Friday, White House spokesperson Kush Desai said the US economy “remains on a solid trajectory”.
Economic adviser Kevin Hassett claimed some wins for the White House, citing drops in the price of eggs, beef and concert tickets on Fox News.
US Vice-President JD Vance said Friday he hoped for a “positive” outcome as he departed Washington for US-Iran peace talks in Pakistan this weekend.
The military conflict in Iran has driven geopolitical uncertainty, sending shockwaves through global energy markets. Photo / Getty Images
But experts predicted more economic pain ahead because of the war in Iran, especially for middle and lower-income households already squeezed by rising energy and airfare prices.
Heather Long, chief economist at Navy Federal Credit Union, said inflation soared in March to the highest level in almost two years.
“This is only the beginning. Food prices, travel and shipping costs are all going up in April and will exacerbate the pain,” she said.
“March CPI was as expected, so no surprises. But there is a huge increase in fuel prices, boosting inflation,” Christopher Low of FHN Financial told AFP.
“And we got the news last night that the ceasefire is not being honoured by either side, apparently,” he said. “There’s still very little traffic through the Strait of Hormuz.”
Some economists calculate the oil price surge will cost each US household at least US$350 per household.
Federal Reserve chairman Jerome Powell signals concern that rising energy costs could delay progress in controlling inflation. Photo / Getty Images
Consumer sentiment also dipped sharply – 11% – this month, according to a University of Michigan survey.
During the Federal Reserve’s most recent meeting in mid-March, chairman Jerome Powell said the war risked delaying efforts to bring inflation under control in the United States.
The US central bank’s target for inflation is 2% – an objective it has not met in five years because of the Covid pandemic, the war in Ukraine and tariffs.
– Agence France-Presse