The U.S.-Iran war is already hitting consumers’ pocketbooks. Here’s how
As the U.S. war with Iran continues thousands of miles away, American consumers are already feeling the financial ripple effects.
US-Israeli attacks on Iran over the weekend ushered in a week of upheaval in markets, rising mortgage rates and soaring pump prices. These changes could drag on already weak consumer sentiment and further increase affordability as a prominent political issue.
“Wars are never good for consumer sentiment,” said Mark Brennan, an associate professor at New York University’s Stern School of Business. “They may be good for ammunition, manufacturers, lobbyists and all these clowns, but they are not good for the average consumer.”
The average gallon of gasoline in the United States reached $3.25 on Thursday. AAA. The organization said the 27-cent one-week increase was similar to that seen at the beginning of Russia’s invasion of Ukraine in 2022.
The 8.5 percent increase in gas over three days was the largest increase since Hurricane Katrina devastated New Orleans in 2005. analysis From Bespoke Investment Group.
With the increase in oil prices on Friday, gas prices are expected to increase further. Gasoline futures in New York rose another 2% on Friday.
RBOB Gas futures, 1 year
Of course, consumers were feeling some relief from oil prices before this week’s shock. The average price of a gallon dropped late last year to its lowest level since 2021, according to AAA.
Mortgage loan rates are climbing
The 30-year mortgage rate rose above 6.1 percent this week. Mortgage News Daily. The popular fixed-rate loan was previously trading below 6%, around multi-year lows.
Mortgage rates broadly follow 10 year Treasury Bond yields rose above 4% again this week following the attack on Iran. High oil prices are raising concerns that inflation will rise again in the bond market, pushing up yields.
30-Year Fixed Mortgage Rate, YTD
Stocks have fallen sharply this week, which could increase the uncertainty felt by consumers who actively trade stocks or have exposure to the market through retirement plans.
Dow Jones Industrial Average It fell nearly 800 points on Thursday as U.S. crude oil rose above $80 a barrel, reigniting concerns about how war could cripple markets. The blue chip average is down more than 2% this week, while the broad S&P 500 It shed 0.7%.
According to Dan Niles, if US crude oil prices rise above $100 per barrel, a global recession could occur. However, the founder of Niles Investment Management said in an interview with CNBC’s “Power Lunch” program that such a scenario is unlikely to occur, predicting that the conflict will last only about a month.
These ripple effects could further intensify the pain Americans have felt since runaway inflation during the pandemic weakened their financial foundations. According to Consumer Research, closely followed by the University of Michigan, consumer confidence has fallen to record levels in recent months.
Even before the war rattled markets, rising economic inequality and the high cost of living had already made affordability a political buzzword as Americans headed to the polls this year for midterm elections.
“Wars bother everyone,” said Brennan. “It’s hard to make a rosy scenario out of any of this.”
— CNBC’s Sean Conlon, Pia Singh and Diana Olick contributed reporting.
