US Economy Videos

Mostly Economics Podcast: How the War on Iran Is Shaping the US Economy with Claudia Sahm:

The podcast examines how the escalating conflict in the Strait of Hormuz – often called the “war on Iran” – is feeding into the United States’ macroeconomic outlook. Host Dean Baker and chief economist Claudia Sahm explore two scenarios: a swift diplomatic resolution versus a protracted closure that could last months. In the optimistic case, even a rapid settlement would not instantly normalize markets. Recent weeks of gasoline hovering above $4 per gallon illustrate how supply shocks reverberate through energy, freight and even airfare costs. The episode places this shock alongside pandemic‑induced bottlenecks, Russia’s invasion of Ukraine and lingering tariff effects, emphasizing the long tail of price adjustments. Sahm highlights that the United States’ exposure is largely price‑based, not physical shortages, thanks to domestic production. She points to the Inflation Reduction Act’s green‑energy subsidies as a strategic hedge against future oil disruptions. The conversation also touches on broader market dynamics, noting that despite high valuations in AI‑driven stocks, a loss of confidence could quickly erode wealth and suppress spending. If the strait remains closed, higher diesel and gasoline costs will squeeze household disposable income and force businesses to trim other expenditures, potentially slowing growth. A deeper crisis of confidence could tip the economy toward recession, making policy responses and diversification into renewable energy increasingly critical for resilience.