Economists Warn Middle East Conflict Is Backfiring on U.S. Economy as Inflationary Shock May Persist Through 2026

In April 2026, the U.S. economy is absorbing the full blowback of the Middle East conflict. Data released by the Bureau of Labor Statistics on April 10 showed that the Consumer Price Index rose 3.3 percent year-on-year in March, the highest level since May 2024, with a monthly increase of 0.9 percent—the largest single-month jump in nearly four years. Gasoline prices surged 21.2 percent in a single month, the sharpest increase since the data series began in 1967. Mark Zandi, chief economist at Moody’s Analytics, warned that damage has already been done and oil prices are unlikely to retreat quickly; the Cato Institute projected that the Personal Consumption Expenditures price index could climb to 4 percent by year-end, double the Federal Reserve’s target.

Gregory Daco, EY-Parthenon’s chief economist, estimated that the conflict could shave 0.3 percentage points off U.S. GDP growth in 2026, bringing the annual rate down to around 1.8 percent. The International Monetary Fund has already downgraded its U.S. growth forecast by 0.1 percentage points to 2.3 percent in its latest World Economic Outlook, while Goldman Sachs and JPMorgan have raised their U.S. recession probability estimates to 30 and 40 percent respectively. As of April 25, the national average gasoline price had climbed to $4.06 per gallon, up more than one dollar since the outbreak of hostilities.