President Donald Trump’s decision to attack Iran will have significant consequences for the US economy.
On Thursday, the Organisation for Economic Co-operation and Development forecast that US inflation will exceed 4% in December. “The energy price surge and the unpredictable nature of the evolving conflict in the Middle East will raise costs and lower demand, offsetting the tailwinds from strong technology-related investment and production, lower effective tariff rates and the momentum carried over from 2025.”
The White House has taken several steps to keep oil prices from spiking, including lifting sanctions on Iran, Russia, and Venezuela, suspending the Jones Act, and releasing oil from the strategic reserve. The price of Brent crude oil increased by 7% to $109 per barrel on Thursday.
The war will also cause global inflation. The G20 now forecasts average inflation of 4% across its member states.
The war will also impact the US job market. Goldman Sachs is estimating that the spike in oil will result in 10,000 job losses every month through the end of the year.
However, the economic consequences will become more severe if the conflict does not end quickly. Goldman Sachs economist Pierfrancesco Mei explained that if the war ends soon, Brent crude will fall to $80 per barrel by December. If the war escalates, the economist believes the price of crude could climb to $160 per barrel.
International Energy Agency (IEA) Executive Director Fatih Birol said on Monday that the world is facing a massive energy crisis caused by the war against Iran.
Birol argued that the current energy crunch is worse than those of the 1970s and the impact of Russia’s 2022 invasion of Ukraine combined. “This crisis, as things stand, is now two oil crises and one gas crash put all together,” he said. “The global economy is facing a major, major threat today, and I very much hope that this issue will be resolved as soon as possible.”
The Department of War is reportedly developing several options for President Donald Trump to escalate the war against Iran, including a ground invasion. While the Pentagon is presenting the escalation as a “final blow” to end the conflict, Tehran says it will respond to an invasion with a major escalation in attacks across the region and close the Bab al-Mandab Strait.
