Iran Conflict Threatens US Inflation, Experts Warn of Self-Reinforcing Spiral

The ongoing conflict in Iran has led to increased oil prices and concerns about a sustained energy supply shock. AEI's Michael R. Strain warns that a prolonged conflict may lead to greater inflation if the public believes the energy price shocks will translate to accelerating inflation across the board in the long term.

Strain argues that the Federal Reserve should treat public inflation psychology as fragile, which makes the situation with Iran even more precarious. President Trump claims that energy price increases will be short-lived, but consumers know gas prices are already higher than usual, and a self-reinforcing inflation spiral is a real threat.

The Jones Act, introduced in 1920, requires all shipments of goods between US ports to be carried on US-built and -flagged vessels. AEI's Vincent H. Smith makes the case that this bill is largely antiquated and creates economic strain on US energy supply chains. While Iran lays mines in the Strait of Hormuz to disrupt global oil and gas supplies, the Jones Act is preventing US energy producers from responding to domestic needs to keep prices manageable.