Bank of America researchers say that while the conflict involving the U.S. and Iran has drawn significant market attention, their core outlook for the U.S. economy remains intact for now. In a research note, BofA analyst Meghan Swiber wrote that the firm has not materially altered its baseline projections in response to the developments.
Swiber cautioned that U.S. macroeconomic vulnerabilities are likely modest unless energy markets see a pronounced jump in oil prices. "We believe U.S. macro risks are likely limited unless [there is a] pronounced oil spike," she wrote, highlighting that the most immediate channels for any broader economic impact are through inflation and the timing of monetary policy moves.
According to BofA, oil prices remain the principal transmission mechanism by which the geopolitical developments could affect the wider economy. The bank cited a commonly used rule of thumb that ties crude price moves to swings in consumer inflation and output: a $10 rise in crude tends to lift personal consumption expenditures inflation by approximately 0.1 percentage points while reducing GDP growth by a similar magnitude.
"The Fed estimates a 10% increase in the oil price raises PCE inflation by roughly 10bp near term," Swiber added, noting that the direct inflationary impulse normally dissipates within about a year as higher energy costs curb demand for other goods and services.
BofA also emphasized that the U.S. is less exposed to traditional oil shocks than in prior decades because it now operates as a net exporter of oil and natural gas. That shift means higher prices can provide an offsetting benefit to domestic energy producers, muting some of the negative pass-through to the broader economy.
On policy, BofA expects the Federal Reserve to proceed cautiously. Swiber said policymakers will likely adopt a wait-and-see stance as they evaluate whether any sustained increase in oil prices leads to a broader and more persistent rise in inflation or instead contributes to weaker economic activity. In the near term, therefore, the most immediate consequences could be shifts in the expected timing of rate cuts and movements in the U.S. dollar.
Bottom line: BofA judges that, absent a sharp and sustained oil-price surge, macro risks to the U.S. outlook stemming from the conflict remain contained, with oil-linked inflationary pressure and the pacing of Fed policy the key variables to monitor.