How insulated is the US economy from the Iran war?

In the last year, the U.S. economy has seemed to defy gravity, withstanding a chaotic trade war, shocks to the labor supply, and wild swings in the stock market. Now it is absorbing a global oil shock far better than most of the world.

The U.S. economy entered the war on solid footing, with sturdy consumer spending, interest rates moving lower, and a record stock market. Gasoline was below $3 a gallon.

But it isn’t fully insulated from the Iran war. Gas prices have leapt, hitting inflation-weary Americans and businesses that rely heavily on fuel. Analysts have warned of shortages of fertilizer, necessary for farming, and helium, a critical component for medical machinery and chip production. European pain matters for the U.S., too: Foreign customers for U.S. goods and services might lose buying power as their own economies struggle.

How long can the U.S. economy hold out?

If the war, which began Feb. 28, lasts for only a few more weeks, falling gas prices will likely deliver an economic tailwind later this year. If the stress continues for months, however, economists will start to worry about a slowdown, or even a recession.

President Trump in a prime-time speech Wednesday said he would achieve America’s military objectives “very shortly” and vowed to hit Iran “extremely hard over the next two to three weeks.” Equities markets closed little changed Thursday, while U.S. oil futures soared.

The U.S. entered the war as a major oil producer, which gives it a cushion against shortages, but doesn’t help much on price because oil is sold on a global market. If gas prices remain elevated for a few more weeks, that would start to take a bite out of growth, say some economists. Just a few months of inflated gas prices and snarled supply chains could halt growth altogether and tip the economy into a recession, they say.

The West Coast is especially vulnerable to spillover effects from the Middle East. California imports nearly 18% of its crude from the Gulf, while other crude-importing states largely draw from Canada and Latin America. Cargoes of gasoline, jet fuel and other refined products are expected to become more scarce as early as May or June, according to Andy Walz, who runs the refining, pipeline and chemical businesses at Chevron, the largest oil company in California.

Farms, hospitals and chip factories rely on goods that pass through the Strait of Hormuz. The prices for fertilizers such as urea are up sharply, and lower availability could weigh on crop yields in coming seasons. Qatar accounts for about 35% of the world’s helium, an essential coolant in MRI machines and semiconductor manufacturing. If Qatar’s supply stays sidelined for another four to eight weeks, say experts, shortages could hamper the production of high-end chips.

“If [the strait is] still closed in another four to six weeks, I’m going to start really worrying about a recession,” said Diane Swonk, chief economist at KPMG US, citing rising gas prices and a growing scarcity of other raw materials.

The average price of gas has quickly shot up to north of $4 a gallon, hurting lower-income consumers; prices for diesel, which is vital for truckers who transport all manner of goods, have risen 47% since the war started to more than $5.50 a gallon.

Even if the conflict were to end within two to three weeks, U.S. economic growth won’t quickly bounce back to its prewar path. Iran still has control over ship traffic in the Strait of Hormuz—through which 20% of the world oil typically flows—and damaged oil infrastructure in the Middle East could take years to rebuild. Price surges in fuel could also linger, as companies are often slow to lower prices after their costs decline.

From an engineering perspective, oil wells are often easier to shut off than turn back on. Oil analyst Anas Alhajji recently estimated it would take two months to get oil production back to normal levels after the fighting stopped.

“Don’t confuse the end of the war with the ability to restart production and refining capacity out of the Gulf,” said Joe Brusuelas, chief economist at RSM. “The probability of oil prices returning to prewar levels is extremely low.”

The longer the conflict drags on, the greater the economic toll. “If the current stress test ends in two to three weeks, the economy should continue to grow, and so should corporate earnings,” reads a note from Yardeni Research published shortly after Trump’s speech.

Some economists say economic conditions could deteriorate if the nations are still fighting in June or early July. Others don’t see that happening until the fall or later.

In that case, sustained higher gas prices, further losses in financial markets, and shortages of other goods would weigh broadly on consumer spending, economists say. Lower-income households are the least able to withstand the strain at the pump—some already report trying to trim back on road trips and discretionary spending.

The Middle East accounts for about 20% of the global ammonia trade and 38% of the global urea trade, two of the most widely used nitrogen fertilizers, according to the consulting firm Wood Mackenzie.

Supplies from the Middle East make up only around 21% of the U.S.’s nitrogen fertilizer imports. Fertilizer prices have jumped since the war started, and will likely go even higher if the war keeps up, especially if fertilizer buyers such as India and Brazil start competing more aggressively for the same limited pool of supplies outside the Middle East.

Ben Steffen, a farmer in southeast Nebraska, said he was budgeting to pay $4,000 to $5,000 more in diesel than he previously expected this planting season. He said he already had paid $50,000 more than last year to fertilize his corn fields in the past 30 days.

“Who can sustain this?” Steffen said. “How this doesn’t hit the broader economy is way beyond me.”

Some U.S. companies could increase oil and gas production for export, a potential benefit to the economy. But those decisions might take months because executives will want to make sure that prices will remain elevated.

A more likely scenario is that overall U.S. exports retreat as a prolonged war would likely drag parts of Europe and Asia into a recession, cutting into global demand for major U.S. exports like some pharmaceuticals and parts for computers and airplanes.

Stephen Stanley, U.S. economist at Santander, said that while trade represents only about 10% to 15% of GDP, “if export demand falls by 5 to 10%, that would be a big move.”

Stanley says the expected boon from tax refunds from Trump’s sprawling 2025 tax-and- spending package already have been canceled out by soaring fuel prices, leaving a weaker tailwind for the economy from the bill’s business-investment incentives.

Some economists already have lowered their forecasts for the U.S. growth this year because of the Iran war.

Pimco has shaved off 0.3 to 0.4 percentage point its forecast, assuming the conflict winds down quickly, managing director Tiffany Wilding said. KPMG’s Swonk started the year expecting 2.6% growth in U.S. gross domestic product for 2026, but now estimates 1% growth—assuming the Strait of Hormuz reopens soon.

Ed Yardeni, president of Yardeni Research, thinks the conflict will wrap up soon, resulting in a blip in U.S. inflation, but he doesn’t rule out a prolonged war resulting in outright shortages of oil and other commodities and companies laying off workers in the U.S. He and other economists say a repeat of decades past when prices kept rising and growth stalled is possible.

“The longer this goes on for the more it looks like a 1970s stagflation environment with inflation moving higher and remaining higher,” he said. “Anything beyond six months and all bets are off.”

Write to Chao Deng at chao.deng@wsj.com and Paul Kiernan at paul.kiernan@wsj.com