Apr 3, 2026
Humility might be the best medicine in times of economic hardship. Economist and former Pacific Investment Management Company (PIMCO) CEO Mohamed A. El-Erian published an admonition about the American economy amidst the Iran war in Project Syndicate (1).
“While much of the world braces for the fallout of the Iran war, the U.S. might be tempted to tout its relative economic strengths, not least its energy independence,” he wrote in a recent article for Project Syndicate. “Against this backdrop, what the U.S. needs from its policymakers is not hubris, but humility and decisive action aimed at protecting those who need it most.”
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Historically, the U.S. has managed to rebound from the toughest of economic trials. According to data from the International Monetary Fund (IMF), despite the economy contracting during the Great Recession, it still averaged an annual GDP growth of 1.48% from 2007 to 2020, when compared to only 0.59% for the eurozone (1).
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The IMF also found that the COVID-19 pandemic’s economic disruption did not derail the U.S. for long, as “a robust recovery meant that growth averaged 3.27% in 2021-25,” which, again, outpaced the eurozone’s 2.63%, El-Erian reported.
While the U.S.’ energy independence helps the country avoid the supply shortages that are afflicting Asia and Europe, while weathering the higher energy and borrowing costs spilling over from the Iran war, that doesn’t mean the economy is immune to war.
El-Erian’s warning
“Even if the US economy continues outperforming its peers, it will not necessarily remain insulated from the war’s adverse effects,” El-Erian wrote, citing higher energy and borrowing costs as added pressures to the cost-of-living rise Americans are already facing.
According to the Bureau of Labour Statistics, the Consumer Price Index (CPI) increased by 2.4% over the past year (2). This makes it the sixth consecutive year of the Fed missing its 2% target.
Mark Zandi, chief economist at Moody’s, told CNBC he doesn’t expect inflation to decelerate, saying that inflation is “stubbornly high, especially for necessities,” adding that “of course, this is all before the fallout from events in the Middle East” (3).
With higher energy prices likely to lead to increased price hikes, it’s clear that the U.S. isn’t guaranteed to stay ahead in terms of its economy during the war.
What began as a surge in gas prices in the first three weeks of the war “will soon be translated into higher costs for a wide range of goods, from semiconductors and fertilizers to airplane tickets,” El-Erian said (1).
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What to keep in mind
As inflation increases alongside the risk of financial instability, Americans are seeing the impact in their daily lives.
For example, The Guardian spoke to a librarian from Massachusetts whose husband, who works a delivery job using his own vehicle, has had to take on extra work, sometimes working 12 to 14 hours a day. They also spoke to an Indianapolis bank employee who shared that recent increases have caused him to totally reshape his financial plan for the future, and who, at present, is opting to use public transport and drive his own car less (4).
As the conflict in the Middle East continues, it’s important to evaluate your finances accordingly and make lifestyle changes to adapt — even in the short term — to the higher cost of living. Take public transit, downsize your home or add an extra source of income to ride out these uncertain economic times.
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Project Syndicate (1); Bureau of Labor Statistics (2); CNBC (3); The Guardian (4).
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Em Norton is a Content Specialist at moneywise.com. They have been with the company since 2022.
