Why the US economy is feeling the strain of a war that hasn’t ended on time

Seven weeks into the US conflict with Iran, the economic picture looks split. On one side, financial markets appear largely unfazed. The S&P 500 has continued to climb, even hitting fresh highs, suggesting investor confidence hasn’t been shaken in a meaningful way.

On the other, the situation for households and businesses is starting to feel very different. Higher fuel costs are beginning to show up across everyday expenses, putting pressure on budgets in a way that is harder to ignore, the New York Times reported.

This gap between market optimism and real-world strain is becoming more visible with each passing week.

Oil prices are driving the pressure

At the centre of this shift is energy. Brent crude has moved back towards the USD 100 per barrel mark, while average gasoline prices in the US have risen to about USD 4.10 per gallon. That’s more than a dollar higher than before the war began.

These price increases don’t just stop at fuel. Once energy costs go up, they start showing up everywhere else. Groceries get more expensive, flights cost more, and even buying or renting a home can become pricier. Farmers pay more to produce food, transport becomes costlier, and those added costs eventually make their way back to consumers.

For most families, this is where the impact of the war is actually felt, not in headlines, but in everyday spending.

A timeline that didn’t play out as expected

A big part of the concern comes from how things have unfolded. The war was originally expected to be short, and that assumption shaped everything from policy decisions to market expectations. The thinking was simple: a quick conflict, followed by easing energy prices.

That hasn’t happened.

Instead, the situation has settled into a drawn-out standoff, with only a fragile ceasefire in place and no clear end in sight. That uncertainty is now starting to show up in economic forecasts.

Economists are no longer asking whether the war will affect growth, but how much damage it could do. Some estimates already point to slower growth, rising inflation and a gradual uptick in unemployment over the coming months.

The White House is trying to stay positive

Even as these concerns build, the messaging from the White House has remained largely upbeat.

Officials continue to point to strong stock market performance and suggest that oil prices could come down if negotiations move in the right direction. There’s still an underlying belief that things could stabilise relatively quickly if a deal is reached.

At the same time, the messaging hasn’t been entirely consistent. Earlier comments acknowledged that fuel prices might stay high for longer, but more recent statements have downplayed the seriousness of the situation.

It reflects a difficult balancing act, trying to keep confidence intact while also dealing with growing pressure on households.

Why this is becoming a policy challenge

The longer the conflict drags on, the harder it becomes to manage the economic fallout.

Higher oil prices don’t just raise inflation, they also slow down growth. That combination is tricky, especially for the US Federal Reserve, which is trying to keep prices under control without hurting the job market.

If energy costs stay high, they could start eating into consumer spending, even if people have managed to absorb the initial impact so far.

At the same time, uncertainty makes everything harder to plan. Businesses hold back on investments, and policymakers have less clarity on where the economy is headed.

What happens next depends on how the conflict evolves

At this point, a lot depends on what happens geopolitically. If tensions ease and oil supply stabilises, prices could come down and some of the pressure on households may ease. But if the situation drags on or escalates again, the risks become more serious, especially for inflation and overall growth.

The economy isn’t in immediate trouble, but it is at a sensitive point. And what happens next may depend less on domestic decisions and more on how this conflict plays out.

That’s what makes the current moment uncertain.

The economy is not in crisis, but it is at a turning point. And much of what happens next will depend less on domestic policy and more on how the situation in the Middle East unfolds.