The war with Iran will last longer than President Trump had hoped, but an early withdrawal would pose grave risks for the global economy.

The attack was justified and necessary.

From 2015, when President Obama entered into the Joint Comprehensive Plan of Action until 2018, when President Trump withdrew U.S. participation, Iran enriched uranium to obtain nuclear weapons.

That violated the JCPA and Iran’s obligations under the Nuclear Non-Proliferation Treaty.

10 ATOMIC BOMBS

Now, it has enough near weapons-grade material to quickly make about 10 atomic bombs.

Tehran has hidden a vast stock of missiles and drones near the Strait of Hormuz. It is using those to control access to two-fifths of global crude oil and LNG supplies.

With nuclear weapons in hand, it could threaten the global order with impunity.

Having severely damaged LNG facilities in Qatar, Iran threatens the supply chain for critical materials to make memory chips and high-end processors that come from Korea and Taiwan.

Iran supports terrorists that pirate the Red Sea, attack Israel and obstruct the Persian Gulf.

By these acts, Iran is no longer entitled to the protections of sovereignty.

Economists’ estimates of the war’s consequences indicate minimal risks, because those don’t adequately capture the above-mentioned supply chain disruptions.

The average forecaster surveyed by the Wall Street estimates that the price of West Texas Intermediate Oil would have to rise to $138 a barrel to raise the risk of a recession to 50% or substantially boost inflation and unemployment.

Oil is about half the retail price of gasoline at about $3.00 a gallon.

Hence, gasoline prices should increase about 25% if oil jumps 50%. That’s enough to reduce real consumer spending by one-percentage point of GDP.

Oil industry profits and spending would increase, and more buying power would be distributed through dividends and rising oil company stock values. Those would partially mitigate the negative effects on growth and employment from consumers cutting back on other spending.

In February, the price of a barrel of West Texas Intermediate oil averaged $64.51. After three weeks of the bombing and closure of the Strait, it was about $89 — 37% higher.

In the abovementioned survey, forecasters shaved estimates for 2026 growth to 2.1% from 2.2% in January and increased expected inflation from 2.6% to 2.9%.

That’s hardly the margin of error for most one-year forecasts.

The average retail price for gasoline in February was $2.98. Three weeks after the bombing began, it was almost $3.96. That’s up 38%, not 19% as the formula would predict.

Bloomberg’s economists estimate that the wholesale prices for all refined products — gasoline, diesel, jet fuel and fuel oil — are rising faster than WTI by 50% to 100%.

Crude oil is not universally fungible.

According to the oil field, it varies in weight and sweetness sulfur content, and specific refineries are tuned to accept oil from specific producers.

Shutdown Persian Gulf oil and western U.S. shale, Canadian tar sands and Venezuelan heavy, sour crude can’t meet all refiners’ needs even if they could ramp up production.

US ECONOMY STRONG

The threshold for real damage to the economy has likely been crossed.

Overall, the economy should still do decently — my expectations for economic growth and inflation were more optimistic than the pack prior to the war.

Republicans in Congress structured their 2025 tax bill to inject $200 billion into the economy this year. President Trump is seeking substantial new spending to finance the war and beef up the armaments supply chain, and the Fed is freeing up about $200 billion in bank capital for lending by softening big banks’ capital requirements.

Alphabet, Amazon, Meta and Microsoft will still plough $650 billion into artificial intelligence data centers. Adding in Nvidia and smaller players, AI investments should jump to $1 trillion.

Businesses selling AI agents like Anthropic and Salesforce and others scared by the war will still earn big profits but continue rightsizing their workforce.

Yet forecasters surveyed by The Wall Street Journal show unemployment hardly budging.

Since President Trump returned to the White House, the healthcare sector has added jobs, but the rest of the economy subtracted employees.

Workers are receiving unattractive raises this year, despite rising prices for gas, heating fuels, and products that require significant amounts of energy to deliver — like groceries.

The president feels political pressure and is in danger of recommitting President Johnson’s Vietnam era mistake of pulling out early.

Then Tehran would recover, build atomic weapons, decide who may pass through the Strait and slowly strangle the global economy by demanding tribute for access to Persian Gulf oil, LNG, fertilizer, helium and aluminum.

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Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.