The Economic Costs of the Conflict with Iran

The war in the Middle East and closure of the Strait of Hormuz costs American families. In a global energy market, disruptions overseas quickly hit home through higher prices at the gas pump, on the electric bill, and at the grocery store.

This is why Americans need an enduring peace in the Middle East, not a temporary pause. It will take time for costs to come back down and for shipping levels to return to normalcy. Any return to conflict resets the clock and prolongs economic strain on American families, farmers, and businesses.

The First Shock: Higher Energy and Transportation Costs

More than 25% of the world’s seaborne oil moves through the Strait of Hormuz, meaning disruptions have immediate impacts on energy prices and the broader global economy.

• The closure removed 14 million barrels of oil per day from global markets, driving Brent crude prices from less than $75 per barrel before the war to well over $100 per barrel during active hostilities.
• Global container shipping rates increased by more than 100% within the first 100 days of the war, raising costs for businesses that depend on imported goods, parts, and materials.
• Maritime premiums for war coverage skyrocketed tenfold in some cases, increasing single-transit insurance outlays from roughly $100,000 to more than $1 million.

How These Costs Hit American Households

Higher energy and transportation costs make nearly everything Americans buy more expensive. Businesses pay more to power operations and deliver products, eventually passing those costs down to consumers.

• In May, inflation reached its highest level in three years and surpassed wage growth. Consumer prices are up 4.2% year over year, driven by a roughly 40% rise in gasoline and a 60% increase in fuel.
• Americans paid $60 billion more at the pump than they would have before the war. For the average household, that’s nearly $490 in additional gasoline expenses alone.
• Pressure is also building on the business side. In May, the prices businesses paid to produce goods rose 6.5% year over year– the highest in four years. Nearly a fifth of this increase occurred in April alone.

Higher Cost for American Farmers

Roughly one-third of all globally traded fertilizers pass through the Strait of Hormuz. The disruption has made fertilizers more expensive, harder to secure, and less available for farmers ahead of planting season. When those costs surge, farmers are forced to plant less, take on more debt, or pass higher costs onto grocery stores.

The impact on American agriculture has not captured as many headlines but is just as severe:

• Urea – the world’s most widely used nitrogen fertilizer – surged nearly 80% in price during the first two months of the war.
• Roughly 70% of farmers reported being unable to afford all the fertilizer they needed.
• 58% of farmers reported worsening finances because of rising fertilizer and fuel costs during spring planting.
• The U.S. wheat harvest is forecast at its smallest in 55 years, with production down 22% from last year, meaning less supply and higher prices for bread, pasta, and other staples.

The Ceasefire Must Hold

The tenuous ceasefire is an important step for alleviating this pressure, but the economic damage will not disappear overnight. Businesses need predictability, farmers need reliable inputs, and families need relief from rising costs. Resuming the conflict would bring back the same economic pain Americans have faced the last three months. Pursuing an enduring peace in the Middle East is not just a foreign policy priority; it is an affordability imperative.