Six months after the U.S. and Israel launched strikes on Iran, the war’s economic fallout has split sharply between Wall Street winners and Main Street losers. Stock market investors who held through the initial panic have reaped double-digit gains, while American consumers face gasoline prices above $4 per gallon and a cost-of-living squeeze that shows no sign of easing.
The S&P 500 has surged nearly 22% since bottoming in late March, the Dow Jones Industrial Average is up roughly 19%, and the Nasdaq has gained 27%. If those gains hold through year-end, all three indexes would post a fourth consecutive year of gains despite the worst geopolitical crisis since the 2003 Iraq invasion.
Oil Prices Reshape the Global Economy
The war’s most visible economic consequence has been its impact on crude oil. With tanker movement through the Strait of Hormuz slowed to a crawl after Iran blocked the waterway in early March, Brent crude climbed from a prewar close of about $72 per barrel to as high as nearly $120. Oil has since retreated but remains elevated, keeping gasoline prices roughly a dollar higher than before the conflict began.
According to a Brown University energy cost tracker, the average American household has spent nearly $700 more on fuel since the war started. The White House has brushed off the concern. President Trump called the extra cost a small price to pay for preventing Iran from obtaining nuclear weapons and has promised that oil prices will drop like a rock once the conflict ends.
Pentagon Costs Run Into Tens of Billions
The direct cost to taxpayers has been enormous. Defense Secretary Pete Hegseth told Congress this summer that the latest estimate for the war exceeded $37.5 billion. The Pentagon is requesting an additional $67.1 billion for this fiscal year, and the White House has asked for a record-breaking $1.5 trillion in defense spending for fiscal year 2027, a 42% increase over current levels. That request includes funding for a troop pay raise, more shipbuilding, and rapid procurement of 12 critical munitions types.
The human toll includes 18 U.S. service members killed and more than 750 wounded. Trump has attended three dignified transfer ceremonies, calling the process one of the hardest things to do as a president.
Public Support Erodes
The war’s unpopularity is reshaping the domestic political landscape ahead of November midterm elections. A Reuters/Ipsos poll conducted in late August found just 31% of Americans approve of U.S. military strikes against Iran, down from 37% in March. Republican support has slipped from 77% to 69% over the same period. Wide majorities of Democrats at 90% and independents at 67% disapprove.
Only 25% of Americans approved of how Trump is handling Iran overall, while 63% disapproved. His overall approval rating has fallen to 33%, tying a record low across both of his terms. Even among congressional Republicans who generally back the war, there is growing anxiety that the conflict could cost the party seats in November.
From Bombing to Sanctions: The Economic D-Day
After weeks of reduced military strikes, the administration has pivoted to economic warfare. Treasury Secretary Scott Bessent on August 24 unveiled Operation Economic Outcast, an unprecedented campaign of secondary sanctions targeting any entity worldwide that does business with Iran. Bessent compared it to D-Day in World War II, calling it an economic onslaught against Iran’s financial connections around the globe.
The measures target nearly 60 entities, individuals, and vessels. Treasury has also moved to revoke Banque Misr UAE’s access to U.S. correspondent banking and sanctioned the manager of Bank Melli’s Dubai branch. But the rollout has been cautious, with Bessent offering a cure period and declining to call out China, Iran’s largest trading partner, by name.
Inside Iran, the economic pressure is acute. Annual inflation has hit 66%, the rial has fallen to record lows, and gas station closures have been reported across the country. Iran’s parliament speaker warned that economic collapse poses a direct national security risk.
The International Monetary Fund noted in July that the global economy is being shaped by two opposing forces: the drag from the war and the boost from artificial intelligence investment. That tension has kept the economic picture uncertain even as stock indices reach new highs. If the war persists without resolution, economists warn the divergence between Wall Street and the broader economy could widen further, leaving consumers and small businesses to absorb an increasing share of the cost.
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