4 Ways A War With Iran Could Benefit Americans – And 7 Ways It Would Hurt Them
The joint US and Israeli airstrikes on Iran – which began on Feb. 28 and led to the death of Supreme Leader Ali Khamenei – causing a conflict that revived the American economy in real time.
As Iran retaliates with military bases and energy infrastructure across the Middle East, the Strait of Hormuz is effectively closed. That choke point holds about 20% of the world’s oil.
This supply shock is hitting American households and investment portfolios in very different ways. Here is a reliable accounting of financial collapse.
When war creates wealth
- Energy stocks are growing: If you own shares of Exxon, Chevron, ConocoPhillips, or Occidental, you’ve had a very profitable few weeks. US shale companies are cashing in at the moment, with share sales by US-listed oil and gas producers making March the sector’s busiest month in more than six years. These companies have already raised billions of dollars in stock offerings.
- Defense contractors meet: For investors in the defense sector, the war has been a financial windfall. Defense stocks such as Northrop Grumman and Lockheed Martin rose from the first day of the conflict. Investors are pricing in expectations of higher demand for missile defense systems, fighter jets, and precision-guided munitions. US engagement could increase defense spending close to the president’s $1.5 trillion request – a spending level not seen since World War II.
- US natural gas exporters will benefit from: QatarEnergy halted production after an Iranian drone attack, sending European fuel prices soaring. That’s bad news for Europe and Asia, but it’s a windfall for US Liquefied Natural Gas sellers. Companies like Cheniere Energy see huge market potential as global consumers look for alternatives to keep their grids running.
- Gold tests record highs: If you own gold – whether it’s in physical form, exchange-traded funds, or mining shares – this friction protects your portfolio. With prices recently testing record highs above $5,000 per ounce as investors flee to safer assets, now is an important time to know how to sell your gold without getting ripped off. On the other hand, if you are looking to hedge against further market volatility, established traders like Anthem Gold Group can help you safely add physical precious metals to your retirement portfolio.
Where conflict calls you
- Gas prices are rising: This is a very fast hit for the average American. The national average for gasoline is approaching $4 a gallon, and states like California are seeing prices rise above $5. Mark Zandi, chief economist at Moody’s, noted that if oil prices stay close to current levels of $100 per barrel, fuel prices will continue to rise across the country.
- Groceries will cost more: The war is putting upward pressure on fuel, electricity, and grocery prices through higher transportation, packaging, and fertilizer costs. Oil products are important for plastics and fertilizers. The price of Urea has already increased significantly since the strikes started. If ships cannot deliver fertilizer safely to market, farmers may use less, potentially reducing crop yields and increasing food costs.
- The pain hits low-income families the hardest: The economic fallout from this war is not evenly distributed. Higher fuel prices act as a regressive tax, meaning that low-income families devote a much larger share of their budget to energy. Rising diesel prices increase the cost of trucking, which in turn increases the prices of food and household goods.
- Fixed loan amounts: Many people were hoping for an interest rate cut this year. The war probably put an end to that. Expensive oil keeps inflation stuck, making it more difficult for the Federal Reserve to cut interest rates. As a result, mortgage rates and other long-term interest rates will remain high for the foreseeable future.
- Stagflation is a real danger: Economists have been getting a bad name since the 1970s. If the conflict continues, the US economy may face stagnation – sluggish economic growth combined with high unemployment and high inflation. Modeling by Oxford Economics suggests inflation could rise to around 5% later this year, the highest since early 2023.
- Taxpayers foot the bill: The first week of the war is reported to have cost US taxpayers more than $11 billion, and that figure does not include the construction of troops and warships. Steep increases in defense spending will add to the national debt and deficit. This puts upward pressure on Treasury yields, which ultimately increases your borrowing costs for everything from car loans to credit cards.
- Travel is disrupted and expensive: Airspace closures across the Gulf states have led to the grounding of thousands of flights. Airlines are changing routes in the Middle East, burning more fuel and passing those costs directly on to passengers. The war has driven up the price of jet fuel, which means you should expect to pay more if you have plans to travel this spring or summer.
How do you prepare for whatever comes next
No one knows how this conflict will be resolved, but the country’s lack of clarity is a reason to prepare, not panic.
Start by building a protective cash position. Since interest rates are likely to remain high, moving passive income to high-yield savings or certificates of deposit helps to cushion the impact of rising prices.
At the same time, attack your variable rate debt and avoid making sudden changes to your retirement accounts. The headlines will always change, so focus entirely on what you can control – your spending, your savings, and your debt.
If you have more than $100,000 in savings and are wondering how to navigate these turbulent markets, consider engaging FinanceAdvisors. to help you build a solid strategy.
