Costs of Iran war will linger despite conflict’s end, experts say

WASHINGTON— President Trump promised Americans last week that a spectacular economic recovery was on the way, fueled in part by a deal this month to end his war with Iran.

“Very soon gas will be $2.50 a gallon,” Trump told a crowd on the National Mall Wednesday night. Next year, he said, “is poised for an economic boom no country has ever seen before.”

Economists are skeptical. The effects of the war and other factors driving inflation will likely linger for months, experts say, posing an ongoing challenge for American households and for Trump’s party as it tries to maintain control of Congress in November’s midterm elections.

Patrick Harker, a professor at the University of Pennsylvania’s Wharton School and former president of the Federal Reserve Bank of Philadelphia, said ending the war “will not create a complete comeback.”

“Markets remain cautious and destroyed infrastructure [in the Middle East] “The revival will take some time,” Harker said, adding: “Inflation will remain high for some time.”

Oil prices were falling last week – falling to pre-war levels Friday — and average gas prices are down 7 cents per gallon from a week ago. But Michael Negron, senior fellow for economic opportunity at the Center for American Progress, said it would take significant time for oil transportation through the Strait of Hormuz to increase, rebuild infrastructure and lower gas prices.

“I would expect a continued downward slide,” Negron said, but “we’re not going to be back to $2.90 per gallon in a few weeks.”

That means fuel prices and prices of other basic necessities are unlikely to improve dramatically before the midterms, when affordability becomes a driving issue. That could increase challenges for Republicans defending their majorities in the U.S. House and Senate as Democrats try to use the issue to gain ground.

Gina Plata-Nino of the Center for Food Research and Action, a national anti-hunger advocacy organization, said positive messages from Trump and other officials about the economy “are not really resonating” with Americans struggling to make ends meet.

“When you still make the same amount of money but have less left than you can afford to pay [for] “Your basic needs – gas is more expensive, food is more expensive – they don’t mean much,” he said.

At a fruit stand on West 7th Street, bananas sell for $2 per bunch.

(Carlin Stiehl / For the Times)

Americans question costs

The Iran war has so far cost the average American household between $775 and $1,300 in fuel and tax costs, according to an analysis by Roger Pielke, a senior fellow at the American Enterprise Institute.

The national average gas price was $3.90 on Friday, according to AAA, while California’s average was $5.48 per gallon, down 13 cents from a week ago.

The increase in oil prices also affected diesel and fertilizer prices, creating a ripple effect in many sectors, including agriculture. Consumer prices increased by 4.1 percent in May compared to the previous year, pushing the inflation indicator to the highest level in three years.

Trump relied on a bullish message about the economy but largely dismissed Americans’ concerns about affordability, calling it a “dummy word” and a “hoax.” Last week, he torpedoed Congress’ first major advances on the issue, refusing to sign a bipartisan housing affordability bill after both chambers passed it.

President Donald Trump, left, Dr. Ben Carson closes his eyes as he speaks during an event with the White House Commission on Religious Liberty in the Oval Office on Friday.

(Anna Moneymaker/Getty Images)

Meanwhile, the president’s approval rating for the economy dropped to 33% last week. NPR/PBS News/Marist Poll — its lowest ever in this poll and 3 points below former President Biden’s worst reading on the issue during his tenure.

Almost four-fifths of those surveyed said gas prices were causing some kind of hardship; 34% classify it as a major annoyance and 44% describe it as a minor annoyance. Half of the participants who said they did not take a holiday this summer said that the reason for this was the cost.

Only 23% of Americans think the war is worth the costs, according to a Reuters/Ipsos poll taken days after the Trump administration announced a framework agreement to end the conflict earlier this month.

“People [are] They just feel like they’re being left behind,” Harker said. “When you go out and talk to people, it’s a very real, tangible feeling. They are worried.”

Brian Reisinger, a rural policy analyst and former GOP strategist in Wisconsin, said the President and his party need a midterm message that “real economic change” is coming.

“There must be something important behind the sale,” Reisinger said.

Senate Majority Leader John Thune (R.S.D.) speaks to reporters after the weekly Senate policy luncheon at the U.S. Capitol in Washington, D.C., on Tuesday. Thune spoke about his meeting with President Trump regarding the Iran deal.

(Kevin Dietsch/Getty Images)

US-Iran talks on shaky ground

Trump’s supporters hailed the Iran deal as a victory for the President. And Trump justified the gas price shock in Iran as “worth not having a nuclear weapon”; however, the war did not achieve the president’s stated goals, including the elimination of his nuclear program.

“President Trump has been clear from the beginning that there will be short-term, temporary disruptions in energy markets and that oil and gas prices will plummet as soon as the situation in Iran is resolved,” White House press secretary Taylor Rogers said Friday.

It is not yet clear how quickly the conflict will be resolved. US-Iran negotiations were on shaky ground as of the weekend; Both countries were giving diametrically opposed messages on the status of key aspects of the negotiations.

Analysts say much of the increase in traffic across the strait is due to the return of Iranian oil to global markets. Trump agreed to a controversial deal with Iran to lift sanctions on Iranian oil, allowing Tehran to continue trading in its most valuable export and breaking with decades of U.S. policy.

The unpredictability of the talks is another factor keeping energy companies, shippers and insurers cautious for now, Negron said.

“Everything will be negotiated in the next two months,” he said. “With the volatility and uncertainty of where we are, it’s natural to expect every barrel of oil and the additional risk insurers pay for to be priced in.”