Mark Zandi, the Chief Economist at Moody’s Analytics, has indicated that the ongoing war in Iran has significantly impacted fuel prices, leading U.S. consumers to spend over $100 billion more as a result. The effects are quite noticeable, especially when it comes to gasoline and diesel costs.
Zandi shared with a business outlet that rising oil prices are the primary economic fallout from the Iran conflict affecting American households. He noted, “The war has led to an additional $115 billion in costs related to higher gasoline prices, the fuel necessary for freight transportation, and jet fuel for air travel.” In simpler terms, this translates to about $860 extra per household—so, if there hadn’t been a war, families would likely be spending less on energy.
Moreover, Zandi emphasized that lower- and middle-income households are suffering the most due to these increases. In contrast, those at the higher end of the income scale manage these higher costs more comfortably. “The wealthier individuals aren’t feeling the pinch,” he explained, adding that many of them have stable jobs and manageable debts, if any. For those struggling financially, the increasing energy costs—like paying over $4 a gallon—are a genuine concern.
It’s noteworthy that inflation has lingered since the pandemic, with energy prices rising sharply this year due to the war’s disruption. Earlier in the year, households experienced a slight reprieve due to hefty tax refunds, which, according to Zandi, helped ease the burden up until around May or June. But these financial lifelines have now faded, and many are still grappling with high gas prices.
The Iran conflict has also created bottlenecks in oil exportation, specifically through the Strait of Hormuz, where much of the world’s oil passes. The risk of attacks has curtailed the flow, and although alternative transport methods are being utilized, supplies haven’t rebounded to what they were before the war.
Zandi mentioned that it would take time for the oil market to stabilize, indicating that the surge in prices is likely to persist. “We might see a gradual normalization, but I doubt prices will return to pre-war levels due to ongoing risks,” he stated, while also acknowledging the measures being taken to manage reserves.
He concluded by noting that the restoration of oil inventories, hampered by the conflict, will require significant time and effort, and suggests that while there are strategies to mitigate immediate impacts, a full return to normalcy is far off.
