Economists are warning that the escalating Iran conflict could trigger a surge in oil prices, disrupt global supply chains, and potentially reignite inflation pressures in the U.S. and worldwide.
Peter Schiff Warns War Spending Could Fuel Inflation
On Friday, economist Peter Schiff warned that a prolonged conflict with Iran could have massive economic consequences, potentially costing the U.S. hundreds of billions of dollars.
“Trump committed Americans to pay billions to defeat Iran, then billions more to rebuild what we destroy,” Schiff wrote on X. “The cost will likely be measured in the hundreds of billions and could top $1 trillion, causing already rising inflation to skyrocket.”
When asked whether the conflict could push investors toward safe-haven assets such as gold, Schiff responded, “Of course.”
He also pushed back against suggestions that rising energy costs alone would drive inflation, arguing instead that government borrowing and money creation would play a bigger role.
“The inflation comes from all the money the Fed will create to fund all the debt the Treasury will issue to pay for the war,” he said.
Price pressures in the U.S. eased at the start of 2026. Annual consumer inflation slowed to 2.4% in January from 2.7% in December, coming in below economists’ expectations of 2.5% and marking the lowest level since May 2025.
Iran War Could Cost US Up To $210 Billion
The U.S. military campaign against Iran, Operation Epic Fury, could cost American taxpayers between $40 billion and $210 billion, said Kent Smetters, director of the Penn Wharton Budget Model, last week.
Smetters estimated the minimum direct budgetary cost at $40 billion, potentially rising to $95 billion, with a more likely figure around $65 billion covering military operations and equipment replacement.
The total could climb further if the conflict lasts longer than two months.
Mohamed El-Erian Warns Of Supply Chain ‘Sudden Stops’
Meanwhile, economist Mohamed El‑Erian warned the global economy could face disruptions if the conflict spreads further.
“The longer this war lasts and the more it spreads, the greater the risk that the global economy may face a simple yet impactful reality once again,” he wrote on X.
“Some production systems and certain cross-border supply chains do not handle ‘sudden stops’ well.”
Oil Surge Raises Global Economic Concerns
The conflict has disrupted crude supplies and affected shipping through the Strait of Hormuz — a narrow waterway that typically carries about 20% of the world’s oil and natural gas shipments.
With parts of the route effectively shut and drone attacks targeting energy facilities, several oil-producing countries, including Iraq and Kuwait, have reportedly curtailed production.
The disruptions helped push oil prices above $90 per barrel on Friday, marking a more than 30% weekly surge. Energy stocks were the only sector in the S&P 500 to finish the week higher.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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