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paul krugman
'The Situation Is Scary': Global Economic Chaos as Trump’s Iran War Sends Markets Diving
"To me, it was not just the worst-case scenario," said one economic analyst. "It was an unthinkable scenario."
Mar 09, 2026
President Donald Trump's unprovoked and unconstitutional war against Iran is sending shockwaves across the global economy in the form of skyrocketing oil prices and diving financial markets.
The prices of both Brent crude oil and WTI crude oil futures on Monday surged past $100 per barrel, as countries across the Middle East announced production cuts in the wake of chaos and destruction caused by the Iran war.
The impact of the price surge on the US stock market was immediate, as the Dow Jones Industrial Average opened Monday trading down by more than 600 points, while the Nasdaq dropped by 300 points.
According to a Monday report from the Wall Street Journal, both Iraq and Kuwait have announced oil production curbs because they have been unable to ship their supply through the Strait of Hormuz and have thus run out of space to store excess petroleum.
JPMorgan Chase analyst Natasha Kaneva noted to the Journal that this is the first time in recorded history that the Strait of Hormuz has ever been completely closed off for shipping, and warned the economic consequences would be severe.
"To me, it was not just the worst-case scenario," Kaneva said of the strait's closing. "It was an unthinkable scenario."
The Journal wrote that Trump's decision to launch a war with Iran has already sparked "the most severe energy crisis since the 1970s," which is now "threatening the global economy."
Petroleum industry analyst Patrick De Haan wrote in a Monday analysis that US drivers should expect to feel the impact of this oil shock in the coming days.
"Gasoline prices in many states could climb another 20 to 50 cents per gallon this week, with price-cycling markets potentially seeing increases as early as today," De Haan projected. "Diesel may rise even more sharply, with increases of 35 to 75 cents per gallon possible as global distillate markets react."
In a Monday analysis posted on his Substack page, Nobel Prize-winning economist Paul Krugman dove into the logistics of stopping and restarting oil production, and argued that the impact of the strait's closure will grow significantly as time goes on.
"As the Strait remains closed, producers are shutting down, and this isn’t like turning off a tap that can be quickly restarted," Krugman explained. "There’s apparently a real nonlinearity here: a two-week closure of the Strait has much more than twice the adverse impact on global oil supply as a one-week closure. If this goes on for multiple weeks... oil prices, which retreated slightly off their highs early this morning, could go much higher."
Krugman said that the shock was not yet bad enough to make an economic crisis inevitable because the US is much less dependent on oil than it was in the 1970s.
Nonetheless, Krugman cautioned, "the situation is scary."
Punchbowl News reported on Monday that the politics of the Iran war "have to worry" incumbent Republicans who were already in real danger of losing their majority in the US House of Representatives even before Trump launched an illegal war.
"With the Strait of Hormuz closed, oil prices have soared to more than $100 per barrel (from just under $70 per barrel 10 days ago)," wrote Punchbowl News. "There’s been a huge spike in gas prices nationally."
The report added that Trump has not been helping his party by expressing indifference bordering on hostility to Americans' concerns about how his war will impact their personal finances.
"Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and World, Safety and Peace," Trump wrote in a Sunday Truth Social post. "ONLY FOOLS WOULD THINK DIFFERENTLY!"
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'Absolutely Massive' Price Shocks Coming as Trump's Iran War Drives Up Gas, Diesel Prices
"What should really terrify Republicans is... the futures price on wholesale gasoline," said economist Paul Krugman.
Mar 04, 2026
President Donald Trump's unprovoked attack on Iran has sent oil prices surging, and it's already hurting Americans at the gas pump.
Petroleum industry analyst Patrick De Haan reported on Wednesday that the average US price for diesel has hit $4 per gallon, the highest it's been since April 2024.
De Haan also projected that the price of diesel would keep rising in the coming days before eventually reaching a price in the range of $4.25 to $4.45 per gallon.
The average price of gasoline is now approaching $3.20 per gallon, De Haan reported, and is projected to rise to at least $3.30 per gallon in the coming days. According to data from the US Energy Information Administration, average US gas prices haven't been that high since September 2024.
Nobel Prize-winning economist Paul Krugman on Wednesday flagged data showing that the price of Reformulated Blendstock for Oxygenate Blending (RBOB) gasoline futures contracts has been going through the roof since the start of the Iran war.
"What should really terrify Republicans is RBOB—the futures price on wholesale gasoline," Krugman commented. "This is up 75 cents a gallon since its low earlier this year."
According to a Wednesday report at Market Watch, researchers at the investment bank Goldman Sachs this week raised their price forecast for Brent crude oil for the second quarter of 2026 to $76 per barrel, an increase of $10.
What's more, Market Watch noted, Goldman is projecting that the price of Brent crude could hit $100 per barrel if the Strait of Hormuz remains closed for the next five weeks due to the war.
Goldman isn't the only investment bank projecting sky-high oil prices if the Strait of Hormuz stays closed for a prolonged period, as JPMorgan Chase earlier this week projected that the price of Brent crude could top $120 if the Iran conflict drags on, according to a Monday report from Market Watch.
Robert Brooks, senior fellow at the Brookings Institution's Global Economy and Development program, said in an interview with Seeking Alpha that global investors at the moment seem to be underestimating the economic risks of a prolonged conflict with Iran, citing "a weird tendency in markets to downplay unexpected shocks when they happen.”
However, Brooks told Seeking Alpha that what's happening with the global oil market right now "is absolutely massive" and should not be ignored.
Trump so far has not outlined any end game for the war he started, and Defense Secretary Pete Hegseth on Wednesday boasted that the Trump administration was "playing for keeps" by delivering "death and destruction from the sky all day" on Iran.
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'More Chaos': Trump Hammered for Plan to Double Down on Tariffs After Supreme Court Ruling
"Donald Trump illegally stole your money," said Sen. Elizabeth Warren. "He should give it back to you."
Feb 20, 2026
President Donald Trump defiantly vowed to continue slapping tariffs on imported goods on Friday after the US Supreme Court overturned the so-called "Liberation Day" tariffs he implemented last year.
In a press conference held hours after the Supreme Court ruled against the president's tariff regime, Trump said that he had other tools at his disposal that allowed him to hit foreign products with taxes.
Among other things, Trump said he was going to issue a 10% global tariff using his authority under Section 122 of the Trade Act of 1974 that allows the president to levy tariffs to address "large and serious" balance-of-payments deficits with foreign nations.
However, as a Friday analysis by the libertarian Cato Institute explains, any tariffs enacted through Section 122 expire after 150 days without authorization from Congress, which in theory could put vulnerable congressional Republicans on the spot to vote for or against the president's signature policy this summer right before the 2026 midterm elections.
The president's decision to plow ahead with his politically unpopular tariffs drew immediate criticism from Sen. Amy Klobuchar (D-Minn.), who said during an interview with MS NOW that Trump was creating even more economic uncertainty.
"What he's done is just doubled down and tried to make it worse," Klobuchar explained, "which, of course, is going to create more cost and chaos for the American people."
Klobuchar: "The scariest part from his press conference, in addition to the continued assault on the rule of law and the Constitution, is that he plans to continue doing this ... [but] I think you're starting to see bipartisan opposition to the president's tariffs, which would… pic.twitter.com/pqniYagtyW
— Aaron Rupar (@atrupar) February 20, 2026
Nobel Prize-winning economist Paul Krugman also predicted more chaos in the months to come from Trump's trade policies, particularly when it comes to businesses that will now lobby to get back the money illegally seized from them by the president's unconstitutional tariff regime.
Writing on his Substack, Krugman argued that Trump finding alternative means to levy tariffs would not "obviate the need to refund the tariffs already collected," because "if you seized money without constitutional authority, finding other revenue sources going forward doesn’t make the original seizure legal."
David Frum, staff writer at The Atlantic, predicted that the coming lawsuits aimed at getting refunds for the illegal tariffs would be a massive mess.
"The post-tariff litigation is going to be nightmarish," he wrote on social media. "Wrongfully taxed plaintiffs will now sue for return of their illegally taken money. Can their customers then sue for a portion of the higher prices caused by the wrongful taxes? More Trump chaos."
However, US Treasury Secretary Scott Bessent downplayed the possibility of American businesses and consumers getting refunded for the tariffs.
While speaking at the Economic Club of Dallas on Friday, Bessent was asked if he expected a "food fight" for the $175 billion in tariff revenues that government has illegally collected since April.
"I've got a feeling the American people won't see it," Bessent said of the tariff money.
Bessent: I got a feeling the American people won't see the $175 billion in tariff revenue we collected pic.twitter.com/rj0Bmm0Exg
— FactPost (@factpostnews) February 20, 2026
However, some Democrats indicated that they were not simply going to let the administration getting away with money they unlawfully confiscated from US businesses and consumers.
"Donald Trump illegally stole your money," wrote Sen. Elizabeth Warren (D-Mass.). "He should give it back to you. Instead Trump is scheming up new ways to force Americans to pay even more."
Democrats on the US House Ways and Means Committee wrote that "Trump does not want to refund the money he illegally stole from you," vowing the party "won't stop fighting to get your money back."
Democratic Illinois Gov. JB Pritzker wrote Trump a letter after the Supreme Court ruling demanding that the president provide every family in his state a $1,700 refund for the tariffs, which he said "wreaked havoc on farmers, enraged our allies, and sent grocery prices through the roof."
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