Analysis: How did the war in the Middle East affect the US economy?

The war in the Middle East has driven up oil and natural gas prices to four-year highs, raising concerns about inflation in the United States. Additionally, American consumer confidence is at an all-time low.

But despite growing concerns about the cost of living, the war with Iran has not significantly - to date - affected the country's spending habits or job prospects.

However, it is worth highlighting that uncertainty about the conflict in the Middle East continues and the Strait of Hormuz remains closed.

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Now let's look at the indicators of the US economy.

Economic growth
Let's start with the most comprehensive measure of the economy: GDP (Gross Domestic Product), which is growing solidly. The latest data released, however, refers to the first quarter of the year, which included just one full month of the US and Israeli war with Iran.

Jobs
The number of jobs grew steadily in the first two months of the war, and the unemployment rate remained low. Employment growth in March was the highest in two years, contrary to economists' expectations.

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Economists have noted, in turn, that the labor market has slowed recently, and data from the past two months has been distorted by a recovery from the government shutdown and some other temporary effects, including labor strikes.

Retail sales
Retail sales grew in March, driven by rising gasoline prices, which stabilized in April. But each month, even excluding gasoline prices, consumers still spent a little more than expected.

In April, the so-called control group, which excludes volatile categories such as gasoline, grew just under 0.5%. This shows that consumers continue to buy despite high gasoline prices.

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Consumer inflation
Inflation reached the highest level in three years in April, driven mainly by gasoline prices. Food prices also rose 3.2% last year and airline tickets rose 20.7%.

Wage growth vs. Inflation
Inflation rose faster than the average American salary grew last year. In other words: inflation has eroded wage growth for the first time since 2023. But this is only a reality for low- and middle-income Americans.

The wages of the richest are still far outpacing inflation -- annual wage increases have covered the increase in the price of gasoline by 17 times, while the wages of low-income Americans have barely covered the increase in the price of gasoline, according to the Bank of America Institute.

Bond yields
The yield on the 10-year U.S. Treasury note rose to its highest level in more than a year. Higher incomes could put further pressure on mortgage rates, keeping the housing market frozen.

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Source: CNN