Donald Trump might be winning the war against Iran, but it might come with dire consequences for the U.S. economy. Paul Krugman, an American economist, gave insight that the U.S. economy will be disrupted for two major reasons.

Appearing as a guest on All In (via YouTube), Krugman dissected the ongoing supply shock of oil that the U.S. is currently facing. He explained that the situation is “potentially really terrible” because the current price of oil is still uncertain, as the war might last for another week or two.

The problem arises because this 20% of the oil is stuck at the Strait of Hormuz, which is significant enough to “shock world oil supplies.” He added, “That’s a much bigger shock to world oil supplies than the oil shocks of the 1970s. This is just a gigantic disruption to world energy supplies.” 

The economist feared that the oil prices could easily go much higher than they are now, “if it’s sustained.” However, he ruled out that possibility because it is “basically impossible, and that’s nasty.” He assured that the world is less oil dependent than it was in the 70s, but if they added all the bad things that have happened in the past six decades of US economic history, it would lead to what is currently happening right now.

Ironically, Chris Hayes stated that Donald Trump’s decision to lower inflation can backfire because of his “two biggest actions.” He explained that he has been unthinkingly imposing tariffs on other countries and even declaring war on Iran unilaterally. He added,

“You kind of couldn’t come up with another way to unilaterally raise prices other than those two.”

The host explained that since the beginning of the war, the prices of oil have been inflated by 40%, and there is a potential recession in the economy. In a separate report from Bloomberg Economics, the breakeven point of an oil barrel is $83. A journalist of the media house explained that this would eliminate the OBBB Act’s tax refunds.

Hence, if the prices of the oil barrels exceed the price range, it would wipe out the gains from refunds. She explained that if the price of a barrel is $110, it would increase the cost of every household to $1,960. In the episode of All In, Kruger agreed to the host, remarking that generally, presidents don’t influence the cost of oil, but this time, such was not the case. 

He joked that the war singlehandedly contributed to inflating the prices of gasoline and oil because Iran had cut off the world’s supply of oil. He further criticised that the POTUS and his cabinet members assumed it would be over soon.