Will U.S. Strikes On Iran Trigger Stagflation Risk?

TL;DR

U.S. strikes on Iran risk stagflation by spiking oil prices into an economy already showing weak job growth.

Key Points

• 1.The U.S. economy lost ~90,000 jobs in February, and all of 2024 produced only ~110,000 total jobs — a fragile baseline before any oil shock hits.
• 2.The Strait of Hormuz carries 20% of global oil supply; tanker captains avoiding it due to conflict could severely restrict global energy flow with little policy remedy available.
• 3.Bond markets responded quickly — 10-year Treasury yields ticked up and inflation "breakeven" measures signaled near-term inflation fears returning among investors.
• 4.Most economists believe stagflation can be avoided if oil stays below $100/barrel, but sustained high prices lasting months would push inflation up several tenths of a percent and force the Fed into an impossible tradeoff between fighting inflation and protecting jobs.