The conflict between the United States and Iran is still developing, and markets have been responding to each new update. When a ceasefire was announced, it helped calm tensions and pushed oil prices down, with Brent crude (a major global oil benchmark) dropping into the $90 range. But when peace talks fell apart, prices climbed back above $100 per barrel, showing just how quickly things can shift. For investors who are in it for the long haul, the most important question is how this conflict affects the broader economy, businesses, and everyday consumers.
Geopolitical conflicts — meaning tensions or wars between countries — often affect financial markets mainly through energy prices. When energy gets more expensive, fuel costs rise, and those higher costs can spread through the rest of the economy over time. How much damage is done depends on how long energy prices stay elevated. Keeping an eye on inflation (how fast prices are rising), the job market, and corporate earnings (how much profit companies are making) can help investors stay grounded during uncertain times.
Energy costs are pushing overall inflation higher
Rising energy prices are the most visible way the Iran conflict is hitting consumers’ wallets
The most direct way consumers are feeling the Iran conflict is through rising energy prices. The latest Consumer Price Index (CPI) report — a common measure of how fast prices are rising for everyday goods and services — for March showed that energy costs jumped 12.5% compared to the same time last year. Gasoline prices surged 18.9%, and fuel oil rose 44.2%. These increases pushed headline CPI (the overall measure, including food and energy) to 3.3%, a sharp jump that has raised understandable concerns about a return to the high-inflation environment seen in 2022. Much of this increase was anticipated, since the conflict in Iran began at the end of February.
Importantly, though, higher energy costs have not yet spread into most other spending categories. Core CPI — which strips out food and energy to give a cleaner picture of broader price trends — rose only 2.6% year-over-year. That was below what analysts had expected and only slightly above the prior month’s reading of 2.5%. An even narrower measure that also removes housing costs, sometimes called “supercore” inflation, rose just 2.3%.
These numbers suggest that while energy prices are definitely biting — with gasoline averaging $4.12 per gallon nationally, and even higher in many areas — those pressures have not yet rippled widely across the economy. This matters because the bigger concern would be if sustained high oil prices caused transportation and manufacturing costs to rise broadly, pushing up the prices of all kinds of goods and services.
Economists often view these kinds of supply-side price shocks — meaning price increases caused by a disruption to supply rather than strong consumer demand — as temporary. The fact that core inflation has stayed relatively stable supports the idea that once the situation in the Middle East settles down, inflation could return to where it was before the conflict. The drop in oil prices following the initial ceasefire announcement also provides some encouragement. That said, the timeline depends on how the conflict itself unfolds, which is hard to predict.
The job market has softened, but demographics are part of the story
Fewer Americans are actively participating in the workforce, complicating the jobs picture
The health of the labor market is another key factor for investors to watch. The latest jobs report showed a positive surprise, with 178,000 new jobs added in March — well above the expectation of just 65,000. However, the previous month was revised sharply lower to a loss of 133,000 jobs, a reminder that these figures can be volatile and subject to big changes after the fact.
Zooming out, the broader trend shows that job creation has been slowing. Since the start of 2025, the economy has added only about 21,000 jobs per month on average — a major slowdown from the 122,000 monthly average seen in 2024. Interestingly, the unemployment rate (the share of people actively looking for work who can’t find it) has not risen much. It edged down slightly to 4.3% in March, but this partly reflects a shrinking pool of people looking for work rather than strong hiring.
A helpful way to understand this is through the labor force participation rate — the share of working-age Americans who are either employed or actively seeking work. As the chart accompanying this article shows, this rate has fallen to just 61.9%, its lowest level since the pandemic. This isn’t a new trend; participation has been gradually declining since the early 2000s, largely because the population is aging. For context, more than 11,000 baby boomers (people born between 1946 and 1964) reach retirement age every single day.
These demographic shifts, combined with lower levels of immigration, mean fewer working-age people are in the labor force. As a result, the economy needs fewer new jobs each month to keep unemployment low, which can make the headline numbers harder to interpret.
Looking inside the monthly report, job growth has been uneven. Most recent gains have come from the “Education and Health Services” sector, while the “Information” sector has shed jobs, consistent with layoff announcements from large technology companies. Wage growth has slowed to 3.4% year-over-year, but it is still outpacing overall inflation for many workers, which helps support consumer spending.
What does this mean for investors? Consumers are dealing with higher costs at a time when job growth is cooling. However, the unemployment rate is holding steady, suggesting that people who want to work are generally finding jobs. The key change is that a smaller share of the overall population is in the workforce compared to the past.
Corporate earnings remain on a strong growth path
Despite the uncertainty surrounding geopolitics, inflation, and employment, one encouraging development for investors has been the resilience of corporate earnings. Even with the challenges described above, consumers have continued to spend, and many companies have maintained healthy profit margins. Current Wall Street estimates suggest that earnings per share (the profit a company earns for each share of its stock) for companies in the S&P 500 — a broad index of 500 large U.S. companies — have grown approximately 16% over the past twelve months. Analysts expect an additional 18% growth over the coming year. These are historically strong numbers, well above the long-term average growth rate of 7.7%.
It’s worth noting that earnings estimates are educated guesses based on analyst projections, and they can change as the economy evolves. Tariff policies, higher energy costs, and a slowing job market could all weigh on company profits in the months ahead. Still, the current strength of earnings growth is one reason stock market valuations — meaning how expensive or cheap stocks are relative to company profits — have improved recently, alongside the market’s recent pullback in prices.
This serves as a reminder that periods of uncertainty, while uncomfortable, can also be when investment opportunities become more attractive for long-term investors. During market volatility driven by geopolitical events, stock prices often move more sharply than the underlying earnings picture warrants. While this doesn’t guarantee a quick rebound, it does suggest that investors who stay patient and hold well-diversified portfolios — meaning they spread their investments across different types of assets — are often rewarded over time.
The bottom line? Higher energy prices are affecting the economy at a time when consumers are already facing other headwinds. However, strong earnings growth and more attractive valuations have created opportunities for investors as well. Maintaining a balanced portfolio and staying focused on long-term financial goals remains the best approach to navigating this environment.