US Economy To Face 'Pretty Limited' Impact From Israel-Iran Airstrikes, With Only A 'Tiny Bit' Recession Risk, Say Economists

The recent airstrikes by Israel in Iran are not expected to have a significant impact on the U.S. economy, according to leading economists.

What Happened:  Although potential risks remain, the U.S. economy’s current outlook appears relatively stable, MarketWatch reported. “I think the risk to the U.S. economy is relatively small,” stated David Seif, chief economist for developed markets at Nomura. “Recession risks are higher, but only by a tiny bit,” he added.

Stephen Stanley, chief economist at Santander U.S. Capital Markets, shared a similar sentiment, stating, “The fallout to the U.S. is pretty limited.”

Analysts at Lazard Geopolitical Advisory cautioned that if Iran feels its legitimacy is under threat, it may exploit its strategic position near the Strait of Hormuz—a vital route for global oil and liquefied natural gas shipments—potentially triggering major economic disruption.

Despite these potential risks, the U.S. economy’s vulnerability to the conflict is primarily through the price of oil, particularly if it crosses $120 per barrel. Economists believe that an oil-price run-up is unlikely if the conflict remains localized between Israel and Iran.

Additionally, the U.S. economy’s dependence on overseas oil is less significant today than it was a decade ago. This means that while U.S. consumers may face higher gasoline prices, it may not have a clear negative impact on the macroeconomy.

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Why It Matters: The recent conflict between Israel and Iran has had a notable impact on the global financial markets. The Dow Jones index fell over 700 points on Friday following Israel’s surprise airstrike on Iranian nuclear sites. Despite this, the CNN Money Fear and Greed index showed a decline in overall market sentiment, remaining in the “Greed” zone.

Meanwhile, President Donald Trump has warned Iran of unprecedented US military action in case of an attack on US forces or land. Trump clarified that the US had no involvement in Israel’s recent attack on Iran and expressed hope for a peaceful resolution between the two nations.

Israel’s recent airstrikes in Iran have also resulted in the death of nine Iranian scientists, adding to the series of successful operations by Israel aimed at Iran’s nuclear experts. This incident follows a decade-long targeting of Iran’s nuclear program by the Mossad.

The NASDAQ Composite declined 1.30%, while the S&P 500 fell 1.13% on Friday.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.