Iran war disrupts oil prices; consumers may be ‘hammered’: economist

In February, Americans were feeling pretty good about their financial standing. But that was before the Iran war, which is threatening to upend household budgets.

A New York Federal Reserve survey released Monday found that consumers expected inflation to be lower in the year ahead, and households, overall, said they were better off than a year ago. The New York Fed’s monthly Survey of Consumer Expectations was fielded from Feb. 2 through Feb. 28.

That same day, the U.S. and Israel attacked Iran, causing the biggest oil supply disruption in history. U.S. crude prices soared more than 35% as a result, recently notching the biggest weekly gain since the futures contract began trading in 1983. 

U.S. oil prices went on to hit a high of $119.50 on Monday, and the national average gasoline price topped $3.50 a gallon as of Tuesday, up 21% from a month ago, according to AAA.

Though U.S. oil prices dropped below $90 per barrel Monday afternoon and continued to slide on Tuesday, they remain far above the near $60-per-barrel level where they started the year.

President Donald Trump posted on Truth Social Sunday evening that a gain in “short term oil prices” was a “very small price to pay” for “safety and peace.”

However, experts say surges in energy costs have fed into longer-term inflation fears.

“Consumers threaten to be hammered by the surge in oil prices, which has already lifted the cost of a gallon of gas by 50 cents,” Mark Zandi, chief economist at Moody’s, told CNBC. 

“If oil prices stay near current levels of $100 per barrel, gasoline will be closing in on $4 a gallon by this time next week. Inflation will quickly accelerate, cutting into consumers’ purchasing power, and hitting consumer spending, GDP and jobs,” Zandi said.