Here are all the ways the Iran war has been affecting the U.S. economy so far

• Economists identify $125 per barrel for West Texas Intermediate crude as the threshold where 'demand destruction begins to accelerate,' creating serious economic problems beyond current levels.
• March inflation data showed a 0.9% monthly increase in headline CPI (3.3% annually) driven by energy, but core inflation remained moderate at 0.2% monthly (2.6% annually), suggesting contained broader price pressures.
• Consumer spending surged 4.3% in March with a 16.5% jump at gas stations, while the University of Michigan sentiment index hit its lowest reading since the 1950s, demonstrating a disconnect between consumer attitudes and actual behavior.

Market Summary: Iran War Impact on U.S. Economy

Key Economic Impacts

The Iran conflict, now over six weeks old, is affecting the U.S. economy primarily through energy costs, with economists projecting modest GDP impacts of a few tenths of a percentage point. A ceasefire could ease inflationary pressures, but resumed fighting threatens fragile economic growth.

Critical Thresholds and Forecasts

Oil prices remain the key concern. RSM Chief Economist Joseph Brusuelas identifies $125/barrel for WTI crude as the critical point for "demand destruction," well above current trading levels near $91 (down from April's $115 peak).

Goldman Sachs reduced 2026 GDP forecast to 2% (Q4-to-Q4), down 0.5 percentage points. The Atlanta Fed projects Q1 growth at just 1.3%, below earlier 3.2% estimates. Goldman expects unemployment to reach 4.6% by year-end, up from March's 4.3%.

Inflation Data

March CPI rose 0.9% monthly (3.3% annually), with core inflation at 0.2% monthly (2.6% annually). Energy costs surged 12.5% year-over-year, while gasoline jumped 18.9%. Gas station spending spiked 16.5% in March, though overall consumer spending remained resilient at 4.3% growth.

Consumer Sentiment

The University of Michigan sentiment index hit historic lows (47.6), worse than during the 1970s stagflation, 9/11, or COVID-19. However, actual spending remains stronger than sentiment suggests, with the average IRS tax refund up 11.1% to $3,521.

Federal Reserve Outlook

Goldman Sachs anticipates two rate cuts in September and December, contrasting with market pricing showing no cuts until mid-2027. Current market uncertainty stems from combined tariff pressures (effective rate at 11.1%) and war-related disruptions.