The economic harm of the U.S.-Iran war extends far beyond the oil field, and the worst of it may be yet to come 100 days into the conflict.

The war was not a slow starter. In the morning of Feb. 28, 2026, American and Israeli forces attacked Iran and, in just days, the Strait of Hormuz, through which about 20 percent of the world's daily oil supply flows, was essentially closed. The war that ensued was not simply a war of arms. It got in the pocket of the average American in the gas prices, the grocery bill, the next phone upgrade and ultimately in the price of all items that contained a circuit board.

The picture of accounting 100 days later is dismal and incomplete.

After years of low inflation rates, inflation has started to increase rapidly in most major economies in part due to rapidly rising oil, gas, jet fuel and gasoline prices. The CPI in the U.S. moved to an annual rate of 3.8 percent in April, the highest it has been in almost three years. Let's put that number into perspective. Before the war, in February, the rate of inflation was 2.4 per cent. It rose to 3.3 percent in March, the highest month-over-month gain since June 2022, as rising costs for consumers of gasoline and other prices were brought up by the Iran war. America's inflation trend was now reversed in less than sixty days.

As usual, the most obvious sign was fuel. For the first time in over three years, the national average price for gasoline rose above four dollars per gallon. That was not a statistic: it was a monthly budget crisis for lower and middle-income families already under financial pressure from years of post-pandemic price increases. Rising oil prices have a more direct impact on prices than the tariffs, which can take months to make a meaningful impact. No lag, no grace period and no time to adjust.

But that was just the opening act with the pump.

Nobody was watching the Supply Chain.

The energy issue has been the main priority of the public when it comes to this war. The more impactful economic tale the one that will continue to unfold throughout the remainder of 2026 and in 2027 is what is occurring with the electronics supply chain.

This is the biggest disruption to the semiconductor industry since the COVID-19 pandemic. According to analysts at Goldman Sachs, prices for printed circuit boards jumped as high as 40 percent in April compared with March. The origins of the cause go back to a certain strike: In early April, Iran struck Saudi Arabia's Jubail petrochemical complex, putting a stop to the production of high-purity polyphenylene ether resin, a key base material in making PCB laminates. SABIC, which produces around 70 per cent of the world's high-purity PPE demand and is based at Jubail, has been unable to resume production, and this is having a significant impact on the supply of high-purity PPE globally.

This one supply shock has spread outwards and eventually will affect every consumer who purchases a smartphone, laptop, TV, or car. Currently, multi-layer circuit boards cost approximately $204 per square meter, and more expensive models of circuit boards used for AI servers cost approximately $1,970 per square meter. The price of copper foil has risen by up to 30% this year, representing about 60% of the raw material costs for making PCB.

Resin and copper are not the only issues. More than one-third of the world's helium (which is used in semiconductor lithography) is supplied by Qatar, and two-thirds of bromine (used in etching) is supplied by Israel and Jordan. All these inputs are currently under supply pressure. The vast majority of semiconductors are produced in countries throughout Asia, all of which have a high reliance on energy imports from the Middle East. The area is also a major producer of aluminum, contributing more than eight percent of the world's supply and with Middle Eastern countries providing almost 20 percent of U.S. aluminum supply as recently as 2025.

The resulting picture is not a one of isolated shortages. It's a series of input failures all occurring at once in one of the world's most interconnected industries.

The pass through won't occur in a flash for the average consumer at electronics retailers. But there's no doubt amongst analysts that it's coming and it will be sometime in the next couple of months. The best protected companies are those who have safety stocks, multiple sources and price power. For everyone else, it's a time of escalating cost pressures in the rest of 2026. The earnings season was already a warning sign of challenges for major chipmakers such as TSMC, Foxconn and Infineon. These are not theoretical threats, they're real threats.

The Household Arithmetic

Moody's Analytics has assigned a price to the cost of this war to American families: $750 per family, or about $100 billion in total, brought on by greater military spending and higher prices due to the oil supply disruption out of the Middle East. This is just for the first few months. It doesn't take into consideration the electronics price wave that is still rippling up the pipeline.

Meanwhile, the consumer has begun to make withdrawals. The University of Michigan consumer sentiment index dropped to 44.8 in May, marking its third straight monthly decrease and a point just lower than the historical low from June 2022. Year-ahead inflation expectations have climbed to 4.8 percent, up from 3.4 percent in February before the war.

ECB economists describe the situation for European consumers as a "double scar" one due to the recent high inflation and another due to ongoing geopolitical tensions. Consumer inflation expectations in the ECB's March consumer expectations survey jumped by 2.5 percentage points in a month after conflict began, while economic growth expectations decreased by approximately 1.2 percentage points. The psychological scarring is important, as well as the hard numbers, because it causes behavior changes in advance of a formal price shift.

The picture is the same when it comes to retail data, just in a different register. There's a shift from discretionary to essential consumer spend. Walmart and Costco are doing better, while Target and Dollar General are doing worse, and the trend has been getting worse and worse. The savings cushion that may have absorbed this blow has been exhausted: The household savings rate has fallen from 6.2 percent at the start of 2024 to 4.0 percent by the end of 2025, leaving families with little savings room.

The Federal Reserve is between a rock and a hard place.

For the Federal Reserve, this war has brought the worst case scenario. Since the Strait of Hormuz closed in March, prices of Brent crude have jumped 60 percent, and inflationary concerns have been repriced sharply. Treasury yields rose by 30 to 44 basis points along the curve as investors changed their minds about the Fed from a 50 basis point reduction by end of 2026 to briefly pricing in a rate hike.

The danger is the classic one of a stagflation situation - rising prices coupled with sagging growth that makes it difficult for the Fed to lower interest rates and give consumers relief. “If inflation starts to pick up because of the war, it could raise the rate, and it could bring about a sudden change in sentiment in the market, which I wouldn't rule out happening in 2026,” JPMorgan CEO Jamie Dimon said.

Although longer-term inflation expectations remain anchored, Fed Governor Christopher Waller said he is concerned that inflation expectations over the next year to five years have risen since the start of 2026. This difference is a very big one. When expectations begin to diverge from the medium-term, these expectations become self-fulfilling: business act as if they know the price, workers require higher wages, the Fed acts as if it knows the interest rate, and the spiral continues on.

The Global Dimension

It isn't just an American tale. The OECD's Economic Outlook, released in June, lowered growth expectations for 2026 to 2.8 percent, from 3.4 percent in 2025, “assuming the current energy disruptions start to fade by mid-year.” If disruption is more long term, for example, if restrictions on the Strait of Hormuz are continued beyond 2027, global growth may slow down to 2.1 percent in 2026 and 1.8 percent in 2027, sending several economies into or close to recession.

CFR has estimated that the economic losses from Iran's closure of the strait could be greater than the economic losses from Russia's invasion of Ukraine in 2022. Fuel-saving measures have to be taken by several countries in the region, as over 80 per cent of the oil normally passing through the strait is destined for Asia. Asia has a particularly sharp exposure due to its reliance on Middle East energy imports, and its unique exposure is due to the fact that Asia is where 99% of all that the world purchases is manufactured.

The disruption of the Strait of Hormuz would be about double the size of the energy shock the world suffered during the 1970s. Al Jazeera's economics desk said the shock of the 70s led to stagflation, recession and structural harm to Western economies. It's not hyperbole to say that's a comparison. It is based on the benchmark of oil flow volumes.

The View From Here

In early April, a ceasefire was announced, which briefly defused market expectations, and for a time, the prospects of a Fed rate cut also rose. But traders have backed away from their previous rate-cut expectation, amid a high degree of uncertainty over the ceasefire's durability. Energy experts say that if the oil stocks keep falling through June, they will reach critical levels for operations and it's time to face triple-digit oil prices.

The worrying aspect is that these pressures are cumulative, thus worrying policy makers, businesses and households alike. Energy inflation makes an immediate impact. Within weeks, there is food inflation. Next are shipping surcharges, for which Amazon already charged third-party sellers a 3.5-percent fuel and logistics fee. Prices for electronics lag by months - coming right when consumers are at their breaking point.

The match was lit by the war. The dry tinder is the supply chain. Plus, the consumer who has been carrying the burden of four years of price recovery from the pandemic is asked to take the heat from it all at once. The $4 gallon was in sight. The circuit board, which costs $200, is still to be.