The ongoing conflict between the US and Iran has far-reaching consequences, affecting not only the global oil market but also the supply chains of various products, from cellphones and laptops to flights and fertilizer. As reported by The Guardian, the war has led to a significant increase in oil prices, with the national average in the US reaching $3.97, the highest since 2023.
The impact of the conflict on the global economy is being felt across various sectors, with the average cost of gas in the US jumping about 30% over the last month. However, diesel, which fuels many trucks that transport goods across the country, has increased even further – by about 50%, or about $1.69 more than it did a year ago, according to data from AAA.
Alex Jacquez, chief of policy and advocacy at the Groundwork Collaborative, a progressive policy group, notes that the impact of oil and gas shortages on the supply chain can be categorized as first-order effects or second-order effects. First-order effects are the direct impacts of the conflict, and for most consumers, this means higher prices at the gas pump.
Supply Chain Disruptions
Second-order effects, on the other hand, are indirect and much broader, with potential impacts to the price of crops, semiconductor chips, and medical devices that could eventually stream down to consumers. Jacquez warns that these effects will eventually work their way through the supply chains, leading to higher prices for various products.
Farmers in particular are struggling as the spring growing season approaches, facing higher fertilizer costs and falling commodity prices. A third of global urea trade, which is a solid nitrogen fertilizer, passes through the Middle East region, with about 20% of imported fertilizer to the US coming specifically from Qatar.
The war's impact on farmers has caught the attention of the White House, which has promised that the US economy would not be disrupted "very much at all" by supply issues. Donald Trump has "a plan for every corner of the disruption, from fertilizer to getting fuel to the west coast," according to Kevin Hassett, the director of the White House national economic council.
Global Economic Implications
The conflict has also disrupted the global helium supply after Iranian attacks in Qatar, the second-largest producer of helium after the United States. The country was forced to halt production at its Ras Laffan industrial complex, which supplies about 20% of the world's liquefied natural gas. Helium is a key import that is used in aerospace, magnetic resonance imaging (MRI), and in making semiconductor chips that are used to power AI.
Increases in oil prices could also result in higher airfare and shipping costs, Jacquez notes. The price of jet fuel has doubled since the start of the war, according to the International Air Transport Association. United Airlines announced last Friday that it would have to cut flights due to the surging cost of fuel.
The average airfare for most airlines – spanning both domestic and international trips, as well as tickets bought last-minute and in advance – was up compared with the same period last year, according to an analysis at Deutsche Bank. The impact of the conflict on the housing market is also being felt, with the average 30-year fixed mortgage rate ticking up to its highest level in months last week, reaching 6.22%.
Housing Market and Mortgage Rates
Mortgage rates are closely tied to the overall state of the economy because they are based on interest rates, which are determined by the US Federal Reserve. Last week, the Fed opted to leave rates unchanged at a range of 3.5% to 3.75% citing uncertainty in the economy, particularly with conflict in the Middle East. Joel Berner, a senior economist at Realtor.com, notes that rising mortgage rates are a major barrier to what should otherwise be a very favorable spring homebuying season.
