5 Ways US-Israel Attack on Iran Could Hit Your Wallet
You probably watch the news about the US and Israeli strikes on Iran and think it is far from the world. I get it. When missiles fly to the center of the globe, your first thought is usually about your budget.
But as someone who has watched global markets react to conflicts in the Middle East for years, I can tell you this: The financial waves are already headed for your wallet.
We’re not just talking about dipping into your retirement account. When shipping lanes are threatened, the global supply chain panics. Let’s break down exactly how this geopolitical upheaval could cost you money in the coming weeks and what you should do to protect yourself.
One thing is very important to understand: The longer the conflict goes on, the more obvious the consequences. If it lasts a week, the effects on the economy, and your family, will be negligible. If it goes on for weeks, though, here’s how it can affect us all.
How conflict affects your finances
1. Spike at the gas pump: This is the fastest hit you’ll get. Shortly after the attack, Brent crude prices fell nearly 9% to around $80 a barrel, according to the Associated Press. Why? Because about 20% of the world’s oil flows through the Strait of Hormuz.
If that chokepoint closes or is restricted, the global supply decreases rapidly. You’ll see those numbers turn around quickly at your local station soon. If you want to lighten the mood, it helps to know the cheapest day to buy gas in your state.
2. The second wave of grocery inflation: Diesel fuel is needed to run the trucks that deliver food to your local grocery store. Energy is needed to run large refrigeration systems in distribution centers. When oil prices go up, transportation costs go up, and companies don’t just absorb those losses. They refer them directly to you.
If you thought grocery prices had stabilized, prepare for another bump in the checkout line. You may want to start focusing on the basics that are still cheap to make up the difference.
3. High prices of air tickets and transportation: Planning a summer vacation? Airlines are very sensitive to fuel costs. The continued increase in crude oil means that jet fuel is more expensive, and airlines will completely slap the fuel surcharge on your tickets.
The same goes for anything you buy online. Major shipping carriers will adjust their rates to compensate for the higher cost of transporting goods around the world.
4. What’s important in your stock portfolio: Wall Street hates uncertainty, and an escalation war is a definite wild card. We are already seeing markets slide as investors panic and move their money to safe havens like gold.
If you are heavily invested in travel or consumer discretionary stocks, you may see negative numbers when checking your accounts. Don’t panic-sell, but be aware that volatility is the new normal for a while.
5. Deferred interest rate reduction: Everyone was hoping that the Federal Reserve would lower interest rates, which would lower the cost of mortgages and credit card debt. But if the oil shock causes inflation to flare up again, the Fed will keep rates high to cool things down. That means borrowing money will remain expensive for the foreseeable future.
You cannot control international conflicts, but you can control your reaction to them. Now is not the time to make money emotionally. Review your budget, maybe fill up your gas tank earlier in the week, and stay cool. Wealth is built by remaining stable when the rest of the world panics.
