Economists warn of "massive uncertainty" and inflationary shocks as conflict with Iran enters second week

Paul Krugman and other top economists warn that the war in Iran could be the "straw that breaks the camel's back" for the U.S. economy.

By: AXL Media

Published: Mar 5, 2026, 4:59 AM EST

Source: The information in this article was sourced from HuffPost

The Threat of Energy-Driven Inflation

Economic analyst Steve Rattner warned on Wednesday that while the United States remains less dependent on foreign oil than in decades past, the conflict in the Middle East will inevitably drive up global commodity prices. The primary concern is the Strait of Hormuz, through which a significant portion of the world's liquefied natural gas (LNG) and oil passes. Rattner noted that even if physical supply remains stable for the U.S., the "risk premium" will cause prices at the pump, home heating oil, and natural gas to spike. This inflationary pressure could force the Federal Reserve to maintain or increase high interest rates, further straining the housing and consumer markets.

A Convergence of Economic Stresses

Nobel Prize-winning economist Paul Krugman argued in his latest analysis that the economic fallout from the war on Iran cannot be viewed in isolation. He highlighted a "perfect storm" of stressors currently impacting the U.S. economy, including:

Tariff Turmoil: The ongoing legal and trade disputes surrounding President Trump’s "Liberation Day" tariffs.

Immigration Policies: The economic drag caused by draconian anti-immigrant measures.