The rise in oil prices has economists worried about a potential recession.
A sharp surge in crude prices tied to the conflict with Iran is flashing warning signs for the U.S. economy, with experts cautioning that prolonged disruptions could trigger a downturn.
Since Iran effectively shut down traffic through the Strait of Hormuz, a vital global oil chokepoint, prices have skyrocketed from under $60 a barrel to more than $100, with some estimates pushing even higher.
Economists say that kind of spike has historically been a major red flag.
Research shows that 10 of the 11 recessions prior to the COVID-19 pandemic were preceded by rising oil prices, making energy shocks one of the most reliable indicators of economic trouble ahead, the Washington Examiner reported.
"The dramatic slowdown in oil shipments through the Strait of Hormuz definitely increases the risk of an economic recession," economist James Hamilton said, noting that the duration of the conflict will be key.
The current surge comes at a time when the U.S. economy was already showing signs of strain, including slowing job growth and weaker first-quarter expansion.
Analysts warn that higher fuel costs are compounding those pressures.
According to a Yahoo Finance analysis in March, oil prices have jumped roughly 45% since the start of the conflict, with gasoline prices climbing toward $4 per gallon.
That kind of increase hits consumers immediately, reducing disposable income and curbing spending.
"There's nothing more instantaneous to a consumer than … watching the numbers tick on the pump," former Trump economic adviser Gary Cohn said on Yahoo Finance's "Opening Bid," warning that higher gas costs are "absolutely recessionary in the short term."
Market signals are also flashing caution.
Major U.S. stock indexes have fallen into correction territory, while consumer sentiment has dropped sharply, erasing earlier optimism.
Economists point to declining confidence as a key channel through which rising oil prices can drag down growth.
The strain is spreading across industries.
Airlines have begun adding surcharges to offset rising jet fuel costs, while shipping companies are increasing prices due to higher diesel expenses.
Those costs are expected to ripple through to everyday goods, putting further pressure on households.
Still, the White House has downplayed long-term concerns, arguing that prices will stabilize once the conflict ends.
President Donald Trump has said economic pressures tied to the war — including higher interest rates — are likely to reverse as conditions normalize.
Federal Reserve officials have also signaled they are aware of the risks.
Unlike in 2008, when policymakers misread oil-driven inflation and delayed action, current leadership has indicated it will "look through" energy shocks and avoid over-tightening monetary policy.
Even so, uncertainty remains high.
Analysts warn that the longer the Strait of Hormuz remains disrupted, the greater the risk of broader economic fallout — including reduced consumer spending, weakened labor markets, and potentially a full-blown recession.
With energy markets on edge and geopolitical tensions unresolved, economists say the trajectory of oil prices could ultimately determine whether the U.S. economy weathers the storm or slips into another downturn.
Reuters contributed to this report.
Charlie McCarthy ✉
Charlie McCarthy, a writer/editor at Newsmax, has nearly 40 years of experience covering news, sports, and politics.
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