Inflation pain could linger even after the Iran war is ends: Economists

"People are entrenched in a cycle of survival debt," one expert said.

In an ideal scenario, the Iran war is over, the Strait of Hormuz is completely reopened, energy prices and inflation fall sharply and American wages rise.

That's according to Mark Zandi, the chief economist for the global financial research firm Moody's Analytics. But the reality is the signs on the horizon indicate those conditions aren't likely to be fully realized anytime soon, Zandi told ABC News, which will mean more financial pain is in store for American consumers already struggling to cover their basic living costs.

"I think under the most likely scenarios for how things unfold, I'd buckle up," Zandi said.

Even if the war ends soon, Zandi added, the trend of high inflation that has been exacerbated by the Middle East conflict will likely continue for the next six to 12 months.

Diane Swonk, chief economist and managing director at KPMG US, told ABC News that inflation stemming from the Iran war comes on top of the inflation with which many Americans have been struggling for the past five years. Everything from the Russian invasion of Ukraine and the uneven reopening of the economy after the pandemic have also contributed to the current inflation crunch, she said.

"Much like stock returns compound over time to give people mountains of wealth, the level of prices has compounded over the last five years to leave prices out of reach for too many," Swonk said.

Inflation jumps to its highest level since 2022

Inflation jumped in May for a third consecutive month as the Iran war continued to drive up prices, surpassing 4% for the first time in three years, the U.S. Bureau of Labor Statistics (BLS) reported last week.

Prices rose 4.2% in May compared to a year earlier, increasing 0.5% from the prior month, BLS data show.

On Wednesday, the Federal Reserve held interest rates steady amid the highest inflation since 2022. The announcement marked the first decision on interest rates rates since President Donald Trump's nominee Kevin Warsh took the helm as Fed chair, replacing Jerome Powell.

Speaking at a press conference Wednesday, Warsh voiced a commitment to bring inflation down to the Fed's desired level of 2%.

"Persistently high prices are a burden for the American people," Warsh told reporters in Washington, D.C. "This committee will deliver price stability."

In a big step toward accomplishing that goal, Iran and the United States have reached a memorandum of understanding (MoU) to cease fighting on all fronts for 60 days and immediately begin negotiating a permanent deal to end the war. As part of the MoU, which has been made public by Iranian officials, the Strait of Hormuz is expected to reopen to all traffic and a U.S. blockade of Iranian ports will be lifted.

Zandi said that even if the Strait of Hormuz is reopened quickly, prompting a global decline in energy costs as oil tanker traffic resumes through the maritime passage, it doesn't mean prices for food and other manufactured goods will suddenly come down. So-called "pass-through costs," defined as increased costs passed on directly from manufacturers and suppliers to consumers as a result of inflation or other causes, typically take several months to be readjusted.

"It takes time for the higher costs they're facing to be incorporated into the prices they charge and actually pass along to their customers, to you and I as consumers," Zandi said, adding that high energy prices tied to the Iran war have cost the typical American household nearly $600 in additional expenditures since the conflict began Feb. 28.

"The cost, particularly for lower-middle-income households, is real money; it matters. For many of these households, there's no easy solution here. There's no panacea," said Zandi.

The skyrocketing cost of tomatoes, beef and lettuce

Adding to the consumer pocketbook pinch are increasing prices that aren't directly tied to the Iran war.

Last week's BLS data showed the prices for many goods on grocery store shelves rose dramatically between May 2025 and May 2026. For instance, the price of tomatoes has risen 32%, lettuce has climbed 24%, coffee has jumped 17% and ground beef is up 12.1%, according to the BLS. At the same time, however, the prices of other goods have fallen, including a 35.2% decrease in the cost of eggs and an 8% reduction in butter.

David Ortega, a food economist and professor at Michigan State University, told ABC News that the price of beef, for example, is driven in large part by supply constraints, drought and a strong demand for beef. Additionally, the price of tomatoes and lettuce has been impacted by foul weather in tomato-producing regions in Mexico and California, while tariffs imposed by the Trump administration have driven up the price of coffee, Ortega said.

"When it comes to food, it's not just one factor that's moving prices; it's really a convergence of factors, or what I like to call a 'perfect storm,'" Ortega added.

'How much more can people take?'

"Right now, we've already been through what seems like a very protracted period of economic pressure on consumers, going back a year, or two years, three years of financial pressure that they're having to endure," Bruce McClary, vice president of the National Foundation of Credit Counseling, told ABC News.

McClary said there has been a surge in Americans coming to his nonprofit group and partners across the country to seek help on managing debt and avoiding bankruptcy and debt collectors.

"It's not that they're overspending on frivolous things like Caribbean vacations and luxury cars, fur coats," McClary said. "They're struggling with basic expenses."

McClary said that people of higher-middle-class income levels of up to $100,000 a year are also seeking financial counseling.

"A lot of people are entrenched in a cycle of survival debt that can only continue for so long before they end up hitting the wall," McClary said.

He noted that his organization releases a quarterly Financial Stress Scale that measures the financial pain Americans are feeling on a scale of 1-10, with 10 being the worst. The group's most recent report showed the level of financial pain in the first quarter of the year at a 6.6, which was slightly better than the 6.8 recorded in the fourth quarter of last year, McClary said.

"We are forecasting that in Q2 of this year, we'll end up at 6.7," McClary said.

By comparison, in 2022, the stress scale was at 3.1, according to McClary.

"We've gone from a record low to a record high. It's an alarming increase," McClary said.

What can consumers do to cope with high inflation?

Making matters worse is that wages aren't keeping up with inflation, according to Zandi, who noted that wage growth is around 3.5% while inflation is around 4%.

"In fact, real disposable income – that's after inflation, after-tax income – is falling on a year-over-year-basis," Zandi said. "That rarely happens outside of recessions."

He added that Americans are "going to have to make some hard choices," including forgoing vacations and restricting spending to necessities only.