How Long Will The Iran War Last? The Economy Depends On The Answer

Key Takeaways

• The trajectory of the economy depends on when vessels resume sailing through the Strait of Hormuz, which has been closed due to the Iran war.
• Some economic forecasts presume the waterway will reopen by March 20, but the prospects for a quick end to the war faded Thursday as attacks continued.
• The longer the war goes on, the greater risk of oil prices rising so high that the energy costs drag the U.S. economy into a recession.

All economic forecasts now hinge on one question: how long will the Iran war last?

With unclear timelines from government officials, there are few details on how long the violence in the region will continue—and what kind of economic impact the fighting may have. Violence in the region continued on Thursday, and the important transportation route through the Strait of Hormuz remained effectively closed.

As a result, the price of Brent crude oil closed above $100 a barrel for the first time since August 2022, up from roughly $70 before the war. The longer the war continues, the greater the impact rising oil prices will have on the broader economy.

What This Means For The Economy

With 20% of global oil flowing through the Strait of Hormuz, prolonged disruption could push inflation higher and slow growth. The war’s duration may determine whether the U.S. and global economies avoid recession.

On Thursday, Goldman Sachs raised its recession expectations 5 percentage points to 25%. The investment bank expects the Strait of Hormuz to reopen to ship traffic by March 21, implying the war will end soon and Iran will allow ship traffic to resume, which would cause oil prices to gradually fall.

The International Energy Agency said it was assuming strait would reopen by that date and “the largest oil supply shock on record” would then start to ease.

The war is overshadowing all other aspects of the economy because of its massive influence on energy prices, which ripple throughout the economy. Higher oil prices have led to costlier gas, travel, and even mortgages, and could soon affect food and nearly every consumer product. Consequences could spill over into the trajectory of employment, inflation, and other economic metrics.

“Our base case remains that if the Iranian conflict and disruption to global energy and commodity supplies lasts no longer than two to six weeks, the impact on inflation and economic activity should be temporary," Kathy Bostjancic, chief economist at Nationwide, wrote in a commentary. “That said, we now see weaker economic activity in Q2 due to the spike in gasoline and energy prices, weaker exports as the rest of the world reels from the disruptions, and an erosion in business confidence.”

Related Education

Brent Crude vs. WTI: Key Differences in Oil Benchmarks

Recession: Definition, Causes, and Examples

Oil prices have been volatile since the first salvo in the war, and stock prices have followed suit. However, the impact has so far been limited, economists said.

“Because the major economies have answered with the large supply from strategic holdings, and because markets are clinging to the view that the conflict will not last long, the spike in oil has been relatively contained,” Douglas Porter, chief economist at BMO Capital Markets, wrote in a commentary.

That could change, however, if that view turns out to be overly optimistic. Analysts at Alpine Macro led by Dan Alamariu, said the prospects of a quick end to the war worsened this week as attacks continued and leaders on both sides vowed to fight on until their aims are achieved. The analysts said the war would last two months, revising their earlier forecast for a 10-day conflict.

The most likely outcome is that both sides declare victory and stop fighting after a few weeks, with the U.S. halting its bombing first and Iran stopping its own strikes a short time later, they wrote.

In addition to the destruction and human suffering caused by the war, both sides have good political and economic reasons to cease fire. As long as the U.S. does not take control of the strait with ground troops—a scenario Alpine considered extremely unlikely—it’s ultimately up to Iran whether to allow traffic through the strait again.

“If Tehran concludes that time favors its war aims and that continued military pain does not threaten its regime’s survivability, then the war drags on,” Alamariu wrote. “The U.S. is likely willing to settle sooner, but Iran gets a veto.”

Economists grappled with how high oil prices could rise if the war continues for months, and what effect that would have on the global and U.S. economies.

Forecasters at Oxford Economics said the global economy would hit a “breaking point” if oil rose to $140 a barrel and stayed there for a few months, with several countries entering a recession and the U.S. flirting with one but not quite going under. Separately, economists at Wells Fargo Securities said sustained oil prices of $ 130 per barrel would cause a U.S. recession.

Do you have a news tip for Investopedia reporters? Please email us at

[email protected]