‘All bets are off’: How the Iran conflict might ripple through the US economy

Americans will feel the punch of rising energy costs after the latest U.S. and Israeli military action in Iran, several energy sector experts told The Lion, but how much it hurts remains to be seen.

While American energy is in a better position to avoid the price surges of the 1970s, policy experts warned that if the conflict persists, costs could rise more dramatically and hurt Americans at the pump and across the economy. 

“American energy dominance has provided a massive buffer against Mideast unrest. We’ve not had that for decades, since World War II,” Tim Stewart, president of the U.S. Oil & Gas Association, told The Lion. “There is great flexibility when you’re the world’s top oil producer, which is what the U.S. is right now.”

“This isn’t 1973 anymore, which is great,” Stewart added, explaining that the U.S. is better insulated than it was during the oil crisis, especially after the shale revolution. “We’re probably the world’s only energy superpower at this particular point. … We have virtually everything we need. We have oil, we have natural gas, we have plenty of coal, we have solar, we have wind – we have everything you need to power a first-world superpower economy.”

Diana Furchtgott-Roth – a distinguished fellow at the Energy Policy Research Foundation who served in several presidential administrations including the first Trump term – told The Lion the conflict is “definitely going to have upward pressure on oil prices.”

“The question is, how high do oil prices go?” she said. “And that depends on how long [the conflict goes on], and no one knows that.”

Furchtgott-Roth explained how “oil prices are set on expectations of future supply, not on current supply,” and given the Trump administration’s pro-energy agenda and the Venezuelan oil acquisition, the supply outlook is positive.

President Donald Trump has already asserted that “as soon as this ends, those prices are going to drop … lower than even before.” 

Secretary of State Marco Rubio also told reporters Monday the Trump administration will begin implementing a program to counter the shock to energy markets. 

The Strait of Hormuz

Another point of stress on global energy markets is the current difficulty of navigating the Strait of Hormuz, a key commercial chokepoint.

EJ Antoni, chief economist at The Heritage Foundation, told The Lion that though the Strait is technically still open, it is risky to traverse due to the conflict, and companies are hesitant to send their ships through it. 

That means energy costs are already starting to spike, he said.

“Energy affects the price of everything we do and everything we buy,” Antoni said. “As you increase energy prices, you’re not just increasing the cost of transporting that food – you’re increasing the cost of producing that food in the first place.”

While Iran does not have the legal authority to halt the Strait’s traffic, it can leverage the threat of force, according to legal scholars and several reports. An average of 20 million barrels of oil flowed through the strait per day in 2024, which amounted to around 20% of the global liquid petroleum consumption, according to the Energy Information Administration.  

The threat also has spooked major maritime insurance carriers for crude and liquified natural gas (LNG) cargoes, effectively bringing commercial transit through the strait to a halt.

Trump responded to these concerns Tuesday, announcing on Truth Social that he ordered the U.S. Development Finance Corporation to provide “political risk insurance and guarantees for the Financial Security of ALL Maritime Trade, especially Energy, traveling through the Gulf. This will be available to all Shipping Lines. If necessary, the United States Navy will begin escorting tankers through the Strait of Hormuz, as soon as possible.”

A ‘blip’ – or more?

A few days in, the market shock has been tame, experts observed. 

Brent Crude and West Texas Intermediate, benchmarks to price a majority of the world’s oil, spiked by about 8% on Monday before fluctuating throughout the day, Stewart told The Lion. “In terms of one day price shocks to the market, this one barely cracked the top 40. It was a blip. … It certainly wasn’t a massive price shock that people were expecting.

“There’s something to be said for North American energy dominance, because it insulates the North American markets against the global price shocks.”

The impact may intensify if the conflict doesn’t, however.

David Blackmon, an energy and policy writer who spent 40 years in the oil and gas business, told The Lion that if the war lingers towards the end of March, “then all bets are off.” Blackmon explained that because oil markets are global, faraway conflict will still impact gas prices for the average American.

Blackmon also noted that the European price of gas has shot up by 50%, and that if the conflict drags on for a long time, Middle Eastern countries will likely have to halt oil production, furthering the ripple effects.

“98% of Americans have no reason to pay attention to this stuff, right? Most of the time, it doesn’t affect their lives,” Blackmon said. “[But] because the price of crude oil is determined on a global market by these speculating traders, everyone’s contracts for crude oil are based off of that Brent index price that’s set on that global market. … So, everyone’s affected, regardless of where they are in the world.”