The Iran Conflict Will Be the ‘Straw That Breaks the Camel’s Back’ for the U.S. Economy if It Goes on Much Longer, Nobel Laureate Paul Krugman Warns
The U.S. economy has been on unsteady footing for a while now, but the catalyst to tip it over the edge could be an event playing out on the other side of the world.
The conflict in Iran is not even a week old, but observers are already seeing ways the war could cascade and contribute to a broader economic downturn on U.S. soil. If the war goes on for much longer, and if belligerents begin to target energy infrastructure important to the global oil and gas trade, the U.S. is likely to feel the economic pinch, according to Nobel Prize–winning economist Paul Krugman.
With initial hopes for a swift, decisive victory in Iran rapidly fading, the U.S. has entered a delicate “war of whim” with no clear endgame and a rising daily price tag, Krugman wrote in a Substack post Wednesday. It’s a potential shock the U.S. might be able to deal with in isolation, he added, but combined with an increasingly fragile and uncertain outlook back home, America’s latest foray in the Middle East could end up coming at an enormous cost.
“It isn’t occurring in isolation,” Krugman wrote. “There are many stresses on our economy, and this could be the straw that breaks the camel’s back—a straw that becomes heavier the longer the war goes on.”
The primary economic risk stemming from the conflict has to do with energy—specifically oil and gas. The Strait of Hormuz—a narrow waterway connecting the Persian Gulf to global trade routes—has been effectively closed since the war’s onset, cutting off the approximate 20% of both liquefied natural gas and petroleum products that ordinarily transit through the strait. (Read more from “The Iran Conflict Will Be the ‘Straw That Breaks the Camel’s Back’ for the U.S. Economy if It Goes on Much Longer, Nobel Laureate Paul Krugman Warns” HERE)
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