Economists are sounding the alarm over the current — and potential — fallout from the U.S.-Israeli war on Iran.

MS NOW economic analyst Steve Rattner on Wednesday was asked what could happen to inflation, oil prices and other economic indicators if the conflict — which President Donald Trump initially said may last four weeks but now admits could run much longer — drags on.

“A lot of bad things,” he said. “A lot of bad things.”

The oil prices could spike some more. As I said, I don’t think it affects our supply, but it affects the prices people pay at the pump and for their home heating oil and even for their natural gas because a lot of natural gas also passes through the Strait of Hormuz. And so then you get more inflation, you get the potential for higher interest rates, you get the uncertainty and the fear of what could happen. And yeah, all that is really bad for the stock market. The stock market’s reaction so far has actually been quite muted. It was down about 1% yesterday. It looks like it will open about flat today. That’s a pretty benign reaction, given everything that could have happened. But the potential for a much bigger stock market disruption is certainly right there if this war were to widen out, or if something unexpectedly bad were to happen to us, to our troops, to the whole Middle Eastern situation.

Paul Krugman, the winner of the 2008 Nobel Memorial Prize in Economic Sciences, meanwhile, warned on his Substack newsletter that any (apparently currently muted) economic shocks caused to America by the war aren’t happening in isolation.

He noted that Trump’s tariffs — “and the huge uncertainty they create for the future” — and his “draconian anti-immigrant policies and their growing economic drag” are still affecting the economy, along with “widespread concerns about AI — both as a bubble that might burst and as a force driving job losses.”

“Now we’ve added a fresh level of massive uncertainty,” he wrote. “Bear in mind that this isn’t even a war of choice; it’s a war of whim, marked by a near-total lack of planning.”

“One shouldn’t exaggerate the economic fallout from this war,” he added. “But it isn’t occurring in isolation: There are many stresses on our economy, and this could be the straw that breaks the camel’s back — a straw that becomes heavier the longer the war goes on. Furthermore, if Trump is this erratic now, what will he do as the midterms get even closer?”

Read Krugman’s full analysis on Substack.

University of Michigan professor Justin Wolfers also warned about the rise in uncertainty — and suggested the biggest economic impact may not be felt in the United States.

“I’m worried: The U.S. is less oil-dependent than our peers, and so Wall Street has responded far less to the war in Iran than financial markets abroad,” he wrote on X. “When the country calling the shots feels only a small share of the pain, that’s a dangerous asymmetry.”

Watch his full analysis here: