In Business Madison

There are two schools of thought about the economic effects of the U.S. war against Iran.

The first holds that price hikes due to shortages, largely the result of Iran’s strategic response to block oil tankers from moving through the Strait of Hormuz, will cause a global recession — especially if the strait, through which 20% of the world’s supply of oil travels, is out of commission for a prolonged period.

The second school says it’s a temporary situation and that once the strait is reopened, energy prices will come back down to earth — perhaps even lower than they were before.

What the national average gasoline price was before the war began on Feb. 28 was $3 per gallon. By April 11, when there was a tentative cease fire and diplomatic efforts were underway to reopen the strait, and before the U.S. launched a naval blockade of that vital passageway, the national average price of gas had risen to $4.14.

Everything from gasoline at the pump to the nitrogen-based fertilizers used by farmers — near the start of spring planting — have been affected.

Most Wisconsin farmers finalized their seed contracts last fall, but some farmers must decide whether to buy new fertilizer, which would raise their input costs, or use less from last year’s depleted supply, which could negatively affect their yields, according to Peter Lukszys, a supply chain expert and distinguished lecturer at the Wisconsin School of Business.

Read more at ibmadison.com.

Story by Joe Vanden Plas
Illustration by Getty Images