Marking six months of conflict since U.S. and Israeli military strikes began on February 28, 2026, the Iran war has shifted from combat strikes to a prolonged confrontation over the Strait of Hormuz. The standoff has driven up energy and food prices worldwide while plunging Iran’s economy into a severe contraction.
The Strait of Hormuz Standoff and Global Energy Pressures
The conflict between the United States, Israel, and Iran has evolved from sustained combat into a strategic battle over the Strait of Hormuz, a critical Middle Eastern shipping route that routinely handles about a fifth of the world’s oil trade, USA Today reported. The disruption of freight through the strait has cut into vital shipments of global fertilizer exports, notably urea and ammonia, with roughly one-third of global seaborne fertilizer trade passing through the waterway, according to United Nations data cited by the outlet.
Energy markets absorbed immediate shocks as shipments declined. The Houthis, a political-religious faction in Yemen controlling the Bab el-Mandeb Strait, announced a Red Sea blockade on July 20. Global oil prices hit $100 a barrel three days later after Iranian-supported Houthi forces announced attacks on two oil tankers from Saudi Arabia, a U.S. ally.
Impacts on American Consumers at the Pump and in the Sky
Higher crude oil costs quickly translated into pain for U.S. consumers. Gasoline prices hovered at a national average of $4.10 a gallon, according to AAA data, coming at a difficult time for household budgets. Higher borrowing costs from elevated mortgage rates also pushed existing home sales down in March to their lowest level in nine months.
Airline travel costs climbed as jet fuel prices increased during the opening weeks of the conflict. Because jet fuel is refined from crude oil, it accounts for as much as 30% of airline operating costs, prompting carriers to raise prices, add fuel surcharges, and offer fewer flights, USA Today noted.
“It’s going to gouge out some of the growth, but we’ll weather through it,” said Mike Skordeles, head of U.S. economics at Truist Advisory Services. “The bigger issue is the uncertainty.”
Mike Skordeles, head of U.S. economics at Truist Advisory Services
Divergent Indicators in the U.S. Economy and Consumer Sentiment
Despite rising pump prices, American consumer spending remained remarkably resilient through the early months of the conflict. Bank of America reported that debit and credit card spending surged 4.3% in March, the most in more than three years, powered by a 16.5% jump in spending at gas stations alongside a 3.6% growth rate excluding gas. IRS data showed that bigger tax refund checks under the One Big Beautiful Bill Act averaged $3,521, representing an 11.1% increase over the same period in 2025.
Yet consumer sentiment presented a starkly contrasting picture. The University of Michigan survey showed consumer sentiment at a record low extending back to the 1950s, though economists emphasize that low sentiment does not necessarily dictate actual spending behavior.
“A fall in consumer sentiment has never been a reliable predictor of actual consumer behavior and we expect real consumer spending to continue to grow, albeit slowly, rising by 0.8% over the course of this year and 1.7% over the course of 2027.”
David Kelly, chief global strategist at JPMorgan Asset Management
Severe Strain and Historical Contraction Inside Iran’s Economy
While the U.S. economy weathered energy shocks with minor downward revisions to GDP forecasts—such as Goldman Sachs trimming its annual growth forecast to 2%—Iran’s economy faced severe fatigue. President Donald Trump told Axios that the United States is ready to let economic pressure quietly mount until Tehran returns to the negotiating table, Yahoo Finance reported.
The Foundation for Defense of Democracies estimated that the U.S. naval blockade cost Iran $435 million a day, pushing total economic damage from the war to around $144 billion, or 40% of pre-war GDP, according to Yahoo Finance. Real GDP in Iran is expected to contract 5.4% year-over-year in 2026 per July International Monetary Fund estimates cited by the outlet, marking the nation’s sharpest economic contraction since 1988.
Sanctions, Currency Devaluation, and Unresolved Inflationary Risks
Iran’s financial lifeline suffered further blows as oil exports plummeted. The American Coalition Against Nuclear Iran estimated that Iranian oil exports dropped to roughly 65,000 barrels a day in May—down 69% from 2.12 million barrels a day before the war—before fluctuating through June and July due to Chinese demand, Yahoo Finance reported. Capital Economics researchers noted that exports likely fell close to zero in July as tanker loading at Kharg Island halted.
This export collapse severely devalued the Iranian rial, which traded near record lows around 185,000 to 190,000 rials per U.S. dollar, driving annual inflation up by 62% in June, Yahoo Finance stated. Iran’s Misery Index, combining inflation and unemployment rates, hit a record high of 91.1 this spring.
With the White House announcing additional sanctions against Iran and its allies on August 25 while refusing to rule out further military action, the central question remains whether regional shipping routes can be fully secured or if prolonged blockades will force a broader global economic adjustment.
