The post-Covid-19 economy is a study in resilience, weathering a series of shocks and crises, from soaring inflation to the war in Ukraine to US tariffs. It is also a study in false alarms, as commentators and analysts have relentlessly predicted an “inevitable recession.”
Now executives rightly wonder whether the US-Israeli war on Iran, which has engulfed the entire region, will finally trigger an American recession. While the war’s influence is evident in headlines and in energy prices, its impact on the economy is far from clear.
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The best thing leaders can do in this situation is to reflect on geopolitical factors and the channels through which the energy crisis is transmitted to the real economy. While this conflict may represent a confluence of headwinds capable of pushing the US economy into recession, it is far from an inevitable outcome.
Duration matters more than prices
While the price of oil often dominates the headlines, it is the duration of the price swings — not the level itself — that matters most. Oil at $300 for a few days would be much preferable to oil at $150 for several months. For the macroeconomy, the duration of the closure of the Strait of Hormuz will continue to be more important than the question of Iran’s political stability.
A short duration of war — measured in days — becomes less and less plausible. The difficulty is that no one — including the White House — knows how long the war will last.
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The impact on energy prices therefore remains deeply uncertain as the Iranian regime holds its ground and its strategic calculations may differ sharply from those of the Trump administration.
How the impact is transmitted to the real economy
Even though the duration and level of the energy price shock are unknown, it is already possible to outline the channels through which these headwinds slow the economy and increase the risk of recession.
The first distinction is between supply and price disruption. Supply disruption does not affect all economies equally; the closure of the Strait of Hormuz primarily impacts Asian economies and, to a lesser extent, Europe. Oil prices are global and, therefore, spread instantly throughout the world economy.
There are five transmission channels from energy prices to macroeconomic impact to consider on the United States economy:
Inflation and real wages
Higher energy prices drive inflation and represent a cut in real wages (less purchasing power) for consumers who cannot avoid filling up their cars. Real wage growth was expected to be about 0.7% in 2026, and at this point in the cycle it is the main driver of consumption growth in the United States. (Hiring, the other driver, has largely stalled.)
A brief spike in energy prices could reduce this growth by about 0.1%, but a sustained increase could completely wipe out real wage growth this year. Still, families can cushion consumption in the face of energy shocks by reducing savings.
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Wealth effect
Declines in stock prices represent a shock to balance sheets that act as a headwind to consumption, even as we continue to emphasize resilience. The stock market’s decline so far (-5%) is still far from a correction (defined as a decline of -10% or more), and even a bear market (-20%) does not guarantee a recession.
In this cycle alone there have been two bear markets without recession (2022 and 2025). And even with a 20% drop, American household balance sheets would remain quite solid.
Investment
Volatility and uncertainty weigh on business confidence and investment as projects are paused, postponed or cancelled. Higher oil prices for an extended period might stimulate some investment in the energy sector, but that would not offset losses from halted or canceled projects in the rest of the economy.
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Still, the advance of artificial intelligence data centers, which has driven growth, is unlikely to be compromised by oil prices, although it brings its own risks. Overall, business investment will add another negative factor to growth, but we expect it to be small if the conflict is not prolonged.
Financial conditions
Volatility in financial markets can increase the flow and cost of credit, as well as cool activity in capital markets. Most U.S. companies are not particularly sensitive to oil prices, but market volatility, lower valuations, high credit spreads or tighter credit conditions create obstacles for companies looking to hire or invest.
Here too, the impact is negative, but we expect it to have a limited macroeconomic effect unless the conflict intensifies.
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Monetary policy
Even if central bankers are inclined to focus on underlying rather than energy-driven inflation, their willingness to preemptively cut rates to support the economy is likely to wane in the face of a new round of confusing, above-target and rising inflation data.
This is confirmed by the markets, which have started to price fewer interest cuts since the start of the war. Another relative headwind, albeit with a modest impact.
What executives should do
As you navigate this new shock, we recommend doing the following:
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— Do not confuse geopolitical crises with macroeconomic crises. Although the former can lead to the latter, many geopolitical crises have not left macroeconomic marks.
— Analyze, don’t predict. The best executives can do in this situation is to analyze the factors behind the shock and its transmission channels to the economy, reevaluating as facts evolve.
— Use history wisely. Reject the idea that “history is destiny”; each historical episode is unique.
— Think on a systemic level. The economic risk is not in the shock itself; resilience depends on the state of the system at the time of impact and the countless reactions of its agents.
— Don’t spiral into negative news. The microphone is often given to those willing to paint the bleakest macroeconomic scenario. Understanding fall risks is essential, but extreme risks must be examined carefully, asking why all protective mechanisms would fail.
Sequence x confluence of shocks
No one knows where a sequence of shocks ends and a confluence begins. The economy had absorbed the inflationary shock and high interest rates when the tariffs hit again — and yet there was no recession.
Now, just before the anniversary of Trump’s “liberation day,” when the economy appeared to be heading for more solid ground, a new shock materializes.
As the dividing line between a sequence of absorbable shocks and an indigestible confluence becomes blurred, the risk to the economy becomes clear.
As mentioned, high prices for a prolonged period can rob the economy of its structural strength.
c.2026 Harvard Business School Publishing Corp. Distribuído por New York Times Licensing
