Clive Crook: Just how resilient is the US economy? The Iran war could turn out to be a test

US President Donald J. Trump’s extraordinary gamble in attacking Iran and risking a wider conflagration in West Asia dials up the economic hazards facing the US economy from ‘very high”’ to ‘extreme.’ This new stress compounds a series of other pressures already facing the economy, which is now even more unlikely to emerge unscathed.The near danger is a setback in financial markets that gets out of hand. In many ways, some such reversal was already overdue, given the apparent overvaluation of US equities, the weight placed by tariffs on the economy’s back, a still-deteriorating fiscal outlook and stubborn inflation.

Add the risks of spiking energy prices, trade interruption and global political turbulence. Inflation is a cause for concern. The core producer price index, which excludes food and energy, increased by 0.8% in January, markedly higher than expected.

Its main components feed into the Fed’s preferred metric, core PCE inflation. That’s running at 3% in the year to December, still much higher than the Fed’s 2% target. On Monday the Institute for Supply Management supplied more such evidence: It said the price of manufacturing inputs is rising at the fastest rate since 2022.Energy inflation would arrive on top of this already-troubling prospect.

Energy prices rose as the strikes on Iran began and analysts are contemplating oil at over $100 a barrel, up from $65 before the offensive. As always, there’s a reassuring best-case scenario: If all goes well, a quick campaign followed by a power shift in Tehran might lift the threat of future conflict and improve confidence in the global energy infrastructure, which could bring oil prices lower than they were before. But if the conflict continues and widens, energy