The U.S. economy has become less recession prone, but the war with Iran does impose new risks.

Through the 1970s, many more Americans worked in factories and before ubiquitous computers, Data Analytics and the Internet, corporate planners had fewer tools to forecast demand.

The economy often followed a progression of excessive hiring and business investment, overproduction and layoffs and consumers and businesses cutting back spending until inventories cleared. Then workers were rehired and the cycle repeated.

The economy was in recession about 15% to 20% of the time in the 1950s and 1960s. Whereas with the rise of the service economy, that statistic is now below 10%.

In today’s data-driven economy, it takes a traumatic shock to instigate a recession: financial regulators failing to act on promiscuous mortgage lending prior to the 2008 Global Financial Crisis; a conscious decision to derail growth like the 2020 COVID-19 pandemic shutdowns and now perhaps a botched war.

Historically, wars boost the economy by employing more young people in the military and ramping up purchases in defense-related industries.

But the war with Iran could prove different, because the economy has developed new vulnerabilities.

Unemployment at 4.3% is hardly recession grade — it reached 9.9% and 14.8% in 2010 and 2020.

During the first Trump and Biden presidencies, the economy grew 2.5% annually and created 135,000 jobs a month.

Since President Trump’s return, it slowed to 2.1% and 26,000, owing to fewer new immigrant workers, confusion sowed by ever shifting tariffs and now the uncertainties imposed by the war.

One hallmark of a recession is the employed continuing to live decently but the unemployed enduring desperate job searches.

Twenty-five percent of the unemployed have been searching for more than six months, up from 19% in 2023

The K-shaped recovery increasingly concentrates income and wealth among the top 20%, who now account for at least half and a growing share of consumer spending, and among seniors, owing to their increasing numbers, rising home values and increasing reliance on tax-advantaged retirement accounts.

Both groups depend heavily on capital gains for income. That makes the stock market a more driver of consumer spending than in the past.

This year, profits for the Magnificent 7 should grow about 19% and 14% for the other 453 businesses in the S&P 500.

Normally, that’s a recipe for a stock market rally. However, anxiety about the war, fed by President Trump’s shifting statements about how long he will continue the fight, has caused a lot of fluctuations in share prices.

Excessive volatility challenges the resilience of wealth driven consumer spending.

Business investment has become similarly concentrated.

In 2026, Google’s and Facebook’s parents Alphabet and Meta, Microsoft, Amazon and Oracle are expected to invest $660 billion or 2% of GDP in AI and $3 trillion by 2030.

Middle East investors have pledged an estimated $2 trillion to help finance those efforts. But without a decisive U.S. victory that opens the Strait of Hormuz and ends the Iranian menace to regional security that financing and the vitality of the U.S. economy are in serious jeopardy.

When the war began, economists quickly computed the impact of higher gasoline prices on consumer spending.

The average among 50 forecasters surveyed by The Wall Street Journal indicated that the price of West Texas Intermediate would have to rise to $146 a barrel and stay there for 14 weeks for the risk of a recession to breach 50%.

Unfortunately, that math does not consider how much Persian Gulf economies have diversified their contributions to global supply chains.

They provide one fifth of the aluminum used by the U.S. economy, and are major global suppliers of nitrogen fertilizer, precursors for plastics and other energy-intensive products.

Qatar supplies helium to Taiwan, whose foundries fabricate 90% of the state-of-the-art microprocessors and South Korea, which produces about two-thirds of memory chips.

While U.S. and Israeli strikes mostly targeted Iranian leadership and military-strategic targets, whereas Iran also targeted oil and gas facilities and the abovementioned industries.

If the Strait is closed to free navigation for more than a few months or Iran is left free to strike critical industrial assets without corresponding consequences, U.S. and global manufacturing will face acute shortages.

Those heighten risks for a supply-side recession similar to two precipitated by crude oil shortages in the 1970s.

If the United States fails to decisively to end the Iranian threat and securely open the Strait, Mr. Trump will exacerbate all these dangers to labor and equity markets, the outlook for AI investment, Gulf industries and global supply chains.

The United States as an exporter of petroleum and helium exporter may be more insulated than Europe and Asia from the damage wrought by Iranian aggression, but it is still vulnerable.
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Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.