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The deeply unpopular war in the Middle East continues to send economic shockwaves across America.
Whether it’s $4 gas, 7% mortgage rates or higher airfares, the war in Iran is significantly raising the cost of living for inflation-weary consumers as the midterm elections approach.
The conflict has cost U.S. consumers about $265 billion since it broke out in late February, according to estimates by Mark Zandi, chief economist at Moody’s Analytics. This equates to about $2,000 in additional costs for the average American household.
“Many Americans have rightly made the connection between the war in Iran and the extremely high cost of living and therefore want the war to end,” Zandi told CNN on Tuesday.
Not only have consumer prices increased, but wages are not keeping pace.
Wage growth slowed in September to its lowest level in five years. Real wages, adjusted for inflation, have fallen almost every month since the start of Iran’s war, prompting some consumers to dip into savings and rely on credit cards to survive.
Energy is at the heart of the financial benefits.
The war in Iran has paralyzed the Strait of Hormuz for months, preventing huge quantities of crude oil, fuel and liquefied natural gas from leaving the Persian Gulf.
Oil flows have rebounded through this narrow waterway, but the cost of extracting crude from the Persian Gulf has also skyrocketed, raising the cost of everything from gasoline and diesel to jet fuel.
Soaring energy prices – including rising heating bills – have cost a typical family about $1,100 since the war began.
At current prices, that figure increases by about $50 per week, Zandi estimates.
Diesel, the fuel that powers trucks, tractors and trains, remains near historic highs.
Gasoline prices have stabilized but remain unusually high for this time of year, at $4.34 per gallon nationally, according to AAA. This is up from $2.98 per gallon before the conflict began.
Pump prices have remained high since the start of the war. Tuesday marked the 165th day of the year with a national average at or above $4 a gallon, according to a CNN review of AAA data.
That’s by far the most for a calendar year since AAA began tracking in 2000, surpassing the previous record of 158 in 2022 under the Biden administration, much of which was attributed to Russia’s invasion of Ukraine.
The only other year gas prices topped $4 a gallon was in 2008, when they were at or above $4 a gallon for 48 days during the summer before Lehman Brothers imploded.
President Donald Trump has previously said that rising gasoline and diesel prices are a small price to pay to prevent Iran from acquiring nuclear weapons.
“Mark Zandi is a Democratic donor who is often wrong, including predicting multiple recessions that never happened,” a White House spokesperson told CNN in a statement Tuesday. “President Trump is rightly ensuring that Iran, a country that has chanted ‘Death to America’ for 47 years, will never possess a nuclear weapon.”
(Zandi was an economic adviser to Republican presidential candidate John McCain in 2008.)
Soaring jet fuel prices have hit the airline industry. Airlines have responded by cutting some cheaper and less profitable routes, raising baggage fees and increasing airfares.
The cost of airfare increased 23% year over year in August, according to the Bureau of Labor Statistics.
The price of fuel oil, very similar to that of diesel, has also increased. Homes using heating oil are expected to pay 21 percent more for fuel than last winter, according to the U.S. Energy Information Administration.
Moody’s found that the second biggest consequence of the Iran war for consumers is rising borrowing costs.
Higher inflation prompted the Federal Reserve to raise interest rates for the first time in three years and contributed to a sell-off in the bond market that sent bond yields sharply higher.
These higher bond yields have brought average 30-year fixed-rate mortgage rates to 7.4%, a nearly three-year high. The costs of maintaining a credit card balance and getting a car loan have also increased.
Moody’s estimates that rising interest rates cost a typical household about $360.
The military conflict itself has been costly, a price that is ultimately borne by taxpayers. The Pentagon told lawmakers in September that the war in Iran had cost $45.1 billion, CNN previously reported, citing sources familiar with the matter.
This estimate is not exhaustive, however, because it does not include the cost of repairing damaged American bases or buildings in the region.
The financial costs of the war in Iran likely help explain why consumer confidence is plummeting and why the war is so unpopular.
Only 27% of Americans approve of Trump on the economy and 28% rate economic conditions as good, according to a September CNN poll.
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