Consumers were pessimistic before the war. Now what?

What It Covers

A U.S.-Iran war triggers oil prices to spike above $119 per barrel before retreating below $90, threatening a broader economic crisis. The episode examines ripple effects across fertilizer, food, and consumer sentiment, drawing parallels to the 1970s oil shocks while assessing today's more fragile economic foundation.

Key Questions Answered

• •Oil supply disruption timeline: Even if the Strait of Hormuz reopened immediately, normalization of oil and natural gas supply chains would take approximately two months, because tankers blocking transit have caused storage overflow at production sites. Consumers and businesses should anticipate sustained elevated energy prices regardless of near-term diplomatic developments.
• •Fertilizer and food price exposure: Roughly one-third of global fertilizer trade transits the Strait of Hormuz. With that route disrupted during U.S. planting season, fertilizer prices are already rising. Only about 15% of supermarket prices reflect raw food costs — the remaining 85% ties to energy-dependent packaging, trucking, refrigeration, and storage, meaning grocery inflation arrives with a months-long lag.
• •Recession risk indicators: The U.S. economy has shed jobs in six of the last twelve months, inflation remains above the Fed's 2% target, and consumers in February's New York Fed survey already expected 3% inflation one year out — half a percentage point above projected wage growth. Economists are openly reintroducing recession probability into forecasts given these compounding vulnerabilities.
• •Consumer expectations as self-fulfilling inflation: University of Michigan research confirms consumer sentiment directly shapes spending behavior. When tariff signals emerged earlier, consumers rushed to buy durables and cars, creating genuine upward price pressure. With daily sentiment data already showing a drop following gas price increases, watch for similar demand-pull dynamics to emerge in coming weeks.
• •U.S. oil exporter status does not insulate consumers: Despite the U.S. becoming the world's largest oil exporter — a reversal from its 1973 position as the largest importer — American consumers and businesses still pay the global market price for oil. Domestic production volume provides no price protection when global benchmarks spike due to geopolitical disruption.