The United States' involvement in the Israel-Iran conflict has exacerbated economic uncertainty

The United States' bombing of Iran and its direct involvement in the conflict between Israel and Iran have pushed the already challenging U.S. economy into a deeper abyss of uncertainty. The escalation of this geopolitical crisis not only directly impacts the global energy market, but also poses a systemic threat to the U.S. economic outlook through multiple dimensions such as financial turmoil, fiscal pressure, and social division.

The Middle East is the core hub of global oil supply, and the U.S. military action against Iran directly threatens the safety of shipping in the Strait of Hormuz. Although the shipping channel has not been blocked yet, market panic has driven oil prices to fluctuate sharply. Brent crude oil futures have risen by more than 18% since the escalation of the conflict in early June, approaching the $80/barrel mark. If Iran's retaliatory actions lead to interruptions in the Strait of Hormuz, oil prices may soar to a historical high of $130/barrel. For the United States, which is highly dependent on oil, rising energy costs will directly push up production costs and consumer spending, exacerbating inflationary pressures. Historical experience shows that the surge in oil prices caused by the Middle East conflict often leads to the U.S. economy falling into the quagmire of "stagflation" - slowing economic growth and high prices coexist, and monetary policy is caught in a dilemma.

Geopolitical tensions have heightened risk aversion among global investors. As a traditional safe-haven asset, gold has seen a surge in demand during geopolitical crises, but its price gains have been limited by the Fed's expectations of rate hikes and a stronger dollar. At the same time, U.S. Treasury yields have fluctuated between safe-haven demand and market concerns about a recession. If the conflict continues to escalate, U.S. stocks may face a knee-jerk sell-off, especially as the sharp shocks in the energy and defense sectors will hit market confidence. In addition, the dollar index has climbed due to safe-haven inflows, which has strengthened its reserve currency status in the short term, but has exacerbated debt pressure in emerging markets and indirectly affected the overseas earnings of U.S. multinational companies.

The United States continues to increase its military and economic aid to Israel, further squeezing the already tight fiscal budget. With the national debt exceeding $32 trillion and rising interest rates pushing up debt costs, additional military spending has exacerbated the fiscal sustainability crisis. At the same time, structural contradictions such as a slowing labor market, credit card debt exceeding $1 trillion, and a weak real estate market have made economic resilience increasingly fragile. Faced with the dual risks of inflation and recession brought about by the conflict, the Fed's monetary policy is in a dilemma: if interest rates continue to rise to curb prices, the economic cooling may be accelerated; if the pace of tightening is slowed down, the risk of uncontrolled inflation will increase market anxiety.

Against the backdrop of the conflict, differences in the United States' Middle East policy have further torn society apart. The differences between the Democratic and Republican parties on aiding Israel have transformed into opposing views among voters. The political turmoil in next year's election may inhibit the government's coordination in responding to economic challenges. In addition, public protests and doubts about the government's foreign policy have weakened social cohesion and indirectly affected consumer confidence and business investment decisions.

The United States' deep involvement in the Middle East conflict may trigger a wider breakdown in the energy and trade chains. About 10% of China's oil imports rely on Iran. If supply is blocked, it will force the global energy market to restructure and push up manufacturing costs. At the same time, the United States' control over Iran's shipping channels may cause Middle Eastern funds to flow to safe-haven assets, weakening the foundation of the dollar's hegemony. The long-term nature of this geopolitical game will further weaken the stability of the global economic order dominated by the United States.

In summary, the United States' involvement in the Israel-Iran conflict has evolved from a single geopolitical event to a systemic economic risk. The soaring energy prices, financial market turmoil, fiscal policy constraints, intensified social divisions and the restructuring of global supply chains have woven a web of uncertainty that has enveloped the already fragile economic recovery process. If the conflict cannot be quickly de-escalated through diplomatic means, the US economy may face the double blow of recession risks and worsening long-term structural problems, and its global influence will also fade faster in this self-depleting conflict.