The economic consequences of the ongoing military campaign against Iran are beginning to preoccupy some of the Trump administration’s closest economic allies, with historian Niall Ferguson publishing a piece in The Free Press arguing that energy shocks of the kind produced by a contested Strait of Hormuz have historically ended in recession with a consistency that should concern anyone counting on 2026 as a banner growth year.
Steve Moore, economist and co-author with Art Laffer of the Trump economic agenda, joined Dan Proft on Chicago’s Morning Answer to assess the risk and offer his read on what the next several months could look like for the American economy.
Moore said he lived through the oil shock of the 1970s, remembering the experience of sitting ninth in line at a gas station in Glenview, Illinois, and watching oil prices climb from roughly four dollars a barrel to thirty dollars in a compressed period of time. He described the entire Nixon, Ford, and Carter era as one prolonged energy disaster from which the country never fully recovered until Ronald Reagan took office and pursued a policy of domestic energy production that broke the cycle. The parallel Ferguson draws to the 1973 Arab oil embargo, which followed Nixon’s military aid package to Israel during the Yom Kippur War and ultimately quadrupled world oil prices, is imperfect in Moore’s view because the United States is far less dependent on Middle Eastern oil today than it was five decades ago. But the fact that roughly a quarter of the world’s oil supply still transits the Strait of Hormuz means a prolonged disruption could push Western European and Pacific Rim economies into recession, and given the interdependence of the global economy, Moore said it is difficult to see how the United States would remain insulated if that happened.
His preferred solution is the same one he credits Reagan with executing the first time: drill, produce, and stop blocking the domestic energy infrastructure that would make foreign supply disruptions a manageable rather than an existential problem. He expressed particular frustration with California, which he noted sits atop more oil reserves than any state except Texas while maintaining policies that prevent extraction, refineries, pipelines, and LNG terminals from operating. He raised the possibility of the Trump administration invoking the Defense Production Act to restart offshore drilling operations over California’s objections, framing the state’s simultaneous complaints about high gas prices and opposition to the infrastructure that would lower them as a contradiction that deserves to be called out directly.
Moore said that at the start of the year he had forecast a blockbuster economic year, pointing to deregulation, record domestic energy production, and the passage of the big beautiful tax bill as conditions that had set up strong growth. The Iran campaign has introduced what he hopes will be a temporary disruption, and he expressed cautious optimism that oil prices could return to pre-conflict levels within three months once the situation is resolved. The political stakes of that timeline are significant. Moore said Republicans are almost certainly going to lose the House given their two-seat majority and the historical tendency of the out-of-power party to pick up between twenty and thirty seats in midterm elections under normal conditions. An affordability crisis still visible at the pump on election day, he argued, could turn a difficult midterm into a historic loss, and he said no state should be considered safe, pointing to Florida as a state where Republican complacency after years of dominance could prove costly, with even Texas theoretically vulnerable if the economic environment deteriorates sufficiently.
Moore also raised concerns about a separate housing policy under consideration within the administration, specifically a proposal to ease creditworthiness requirements for loans backed by Fannie Mae and Freddie Mac by reducing the standard from three credit reports to one. He described it as a replay of the logic that produced the 2008 financial crisis, when progressively loosened lending standards allowed mortgages to flow to borrowers without meaningful verification of creditworthiness or down payment capacity. Moore noted that Fannie Mae, not Lehman Brothers or any of the more prominently remembered private firms, required the largest bailout of the entire crisis, and that a prominent Democratic economist had published a study just a year before the collapse rating the probability of Fannie Mae needing a bailout at one in a million. His view is that Fannie and Freddie should have been privatized long ago, that the revolving door between Congress and seven-figure jobs at both institutions has prevented that from happening, and that easing credit standards now, in a housing market already stressed by affordability problems, risks reconstructing the conditions that took five years to recover from the last time.
On a lighter note, Moore offered an unlikely compliment to Pennsylvania Senator John Fetterman, whom he called his new favorite Democrat for being the only member of Congress willing to say publicly that the Democratic strategy of blocking TSA funding to score political points against the Trump administration, producing multi-hour security lines at major airports, is not serving the public and should stop. He suggested that voters standing in two-hour lines at O’Hare should direct their frustration accordingly come November.