Moody's Analytics Chief Economist Mark Zandi said the Iran war is costing American households more as energy prices ripple through gasoline, diesel and jet fuel.
Zandi made the remarks in an interview with Fox Business published Thursday. He said the conflict has added about $115 billion in energy costs, or roughly $860 per household.
Zandi said the burden is heavier for lower-and middle-income Americans, who have less stock-market wealth and more debt. "And the high energy costs, the fact that we're paying over $4 a gallon, you know, really matters to those folks," he said.
He said the quickest relief would come from the war winding down and more oil moving through the Strait of Hormuz. With oil prices approaching $100 a barrel, Zandi said gasoline could reach $4.50 a gallon.
Rates Add Pressure
Higher interest rates are another cost, Zandi said. The 10-year Treasury yield has risen from below 4% before the war to about 4.75%, increasing borrowing costs for households and small businesses.
The yield subsequently climbed closer to 5%, closing Thursday at 4.943%, its highest close since October 2023.
He said the Federal Reserve is increasingly focused on inflation risks as energy costs filter into expectations and wages. "So they're on the verge of raising interest rates," Zandi said, adding that he could see the Fed's decision going either way. He said the consensus was for a quarter-point hike in a couple of weeks.
Oil Shock Persists
Brent crude recently moved above $100 a barrel amid continued disruption around the Middle East, while U.S. gasoline prices climbed above $4 a gallon. The Energy Information Administration has also raised its 2026 Brent forecast to about $91 a barrel.
Zandi said alternative oil supplies and production could ease the pressure, but warned that adjustment "takes time" and could unfold over several years.