The Iran War Is the New Wildcard in the Jobs Market — and Economists Are Running Out of Historical Parallels

When analysts start quietly acknowledging they don’t have a good historical comparison instead of reaching for one, a certain kind of economic dread sets in. Four weeks into a war with Iran that was supposed to be quick, surgical, and finished before the second quarter, that is about where things stand at the moment. It isn’t.

The stated goals of Operation Epic Fury, which began on February 28, were to destroy Iran’s nuclear capability and, if the more optimistic briefings are to be believed, to bring down the regime’s command structure in a matter of weeks. Iran had different ideas. About 20% of the world’s crude oil passes through the Strait of Hormuz every day, and its forces have maintained near-total control over it. The conflict’s attritional, grinding nature has shocked those who had anticipated a quicker conclusion. At least until the third quarter of 2026, ING Bank now expects restricted passage through the strait. If that timeline is accurate, it is more than a geopolitical issue. There is no clear historical narrative; it is an economic one.

The comparison to the 1970s keeps coming up, and for good reason. The price of gasoline has increased by almost a dollar per gallon since late February, and Brent crude has risen from about $67 per barrel prior to the bombing to somewhere over $110. According to Samuel Tombs of Pantheon Macroeconomics, the national average will reach $4.20, and the price of diesel, which powers almost everything Americans purchase, will rise even more sharply. Uncomfortably familiar is the inflationary image. The U.S. economy “now faces its second stagflation-like shock inside a year,” according to Sal Guatieri of BMO Capital Markets, who noted that in addition to the disruptions caused by the trade war, the Iran conflict is now simultaneously raising inflation, shaking investor confidence, and decreasing global demand. The term “stagflation,” which was mostly abandoned by economic analysts after the 1980s, is roughly defined by this combination of rising prices, slowing growth, and frozen hiring.

However, economists are also quick to point out where the parallel from the 1970s ends, which is why the historical ambiguity seems so real rather than manufactured. The calculus is significantly altered by the fact that the United States is now a major producer of crude oil on its own. There is less chance of the kind of wage-price spiral that turned a supply shock into a ten-year ordeal because consumer inflation expectations are still more stable than they were fifty years ago. According to Jim Reid of Deutsche Bank, “Clearly whether history repeats itself all depends on how long this conflict lasts.” That warning is more important than it might seem. The length of the war is a hidden variable that is included in every economic forecast being made at the moment, and no one has a trustworthy estimate for it.

The current state of the labor market is less unclear. Prior to the first bombing, the U.S. economy lost 92,000 payroll jobs in February. The current environment is a “job-hugging” moment, according to Stanford economist Nicholas Bloom, who has spent years researching how uncertainty affects hiring behavior. Employers are reluctant to open new positions when the energy outlook is changing weekly and mortgage rates are rising, and workers are afraid to leave positions even when they are unhappy. Job openings decreased by slightly more than 1% following the start of the conflict, according to data from Indeed and LinkUp. This tiny figure suggests a more significant shift in employer psychology. The math has changed, but hiring managers don’t stop hiring. They pause because, while oil tankers are being hit in the Gulf and Isfahan is being hit by American airstrikes, confidence has vanished and is difficult to regain.

It seems almost surreal to watch this develop from the perspective of the financial markets. At first, Oxford Economics forecasters maintained their interest rate and equity estimates, believing that the S&P 500 would rise after the war. For an organization that favors measured adjustment, Goldman Sachs made a significant change by lowering its GDP growth forecast for 2026 to 2.2% and raising its PCE inflation expectation to 2.9% by December. Using an AI-powered model, Mark Zandi of Moody’s Analytics estimated that there was a 49% chance of a recession in the United States this year. That does not indicate a recession. The fact that the coin is in the air is acknowledged.

Perhaps the most uncomfortable position is that of the Federal Reserve. Policymakers were already split before the war over whether to lower interest rates to help a faltering labor market or keep them higher to combat inflation. Both sides of that debate have worsened concurrently as a result of the Iran conflict: energy costs are driving up inflation, while hiring caution and slower consumer spending are driving up unemployment. The likely result, according to Capital.com’s Daniella Hathorn, is “a more divided Fed, greater policy uncertainty, and increased volatility across both bond and equity markets.” Given what is already taking place in those markets in real time, that assessment feels both accurate and somewhat understated.

Economic coverage doesn’t always focus on the ripple effects. The Gulf states are major producers of fertilizer, and U.S. farmers are facing a 25% price increase. This comes at a time when input costs were already putting pressure on agricultural margins. At a time when chip supply chains were just starting to stabilize, the global helium supply, which is mostly routed through facilities close to Hormuz, is being disrupted, endangering semiconductor manufacturing. In March, German business confidence dropped to 86.4, and economists cautioned that any recovery momentum Europe had managed to establish could be undermined by ongoing energy costs.

The worst-case models may not accurately predict how quickly things normalize. Twelve-month oil futures are trading at about $75 per barrel; this suggests that there is some expectation of a resolution because markets aren’t pricing in a permanent shock. There are persistent indications of possible mediation, and Trump has publicly dismissed the increase in energy prices, characterizing it as a short-term expense of removing a nuclear threat. However, there are substantial barriers to mediation efforts, and neither party has demonstrated a clear desire to make concessions anytime soon. The economic forecasts are consistently changing in one direction. The war continues to defy its original schedule. Additionally, this specific combination of factors is genuinely difficult for economists, who are trained to find a precedent for everything, to map onto anything they have seen before.