In the face of the ongoing Iran war, which has disrupted over a fifth of the global energy supply, the U.S. economy has demonstrated remarkable resilience, according to an economist.
Eswar Prasad, a senior professor of trade policy and economics at Cornell University, attributes this resilience to the country's transition from a manufacturing-heavy economy—unlike countries like Germany—to a service-oriented one.
In an interview with Fortune, Prasad noted that even though average gas prices in the U.S. have surpassed $4.45, with some regions reaching $6—the highest levels since 2022—the overall disruptive effect on the economy is minimal. “The U.S. is not the manufacturing powerhouse it once used to be,” he said.
Prasad added that the service economy has kept the U.S. economy buoyant during an otherwise challenging period in the global economy. He also emphasized that America's role as a net oil exporter has helped mitigate the impact of the oil shock.
Growth Steady But Demand Weak
The Iran war has driven gas prices to $4.43 per gallon, a 61% increase since December, while crude oil prices were above $110 per barrel at the time of writing. However, Prasad remains optimistic about the resilience of the U.S. economy, stating, “The U.S., even before the shock, was in the best position to withstand any major global shock.”
Meanwhile, despite efforts by the Trump administration to boost manufacturing, the sector still lost around 108,000 jobs in the first year of his second term. However, the sector is still seeing a boom, said investor Anthony Pompliano. U.S. manufacturing continued expanding in April, with the ISM Manufacturing PMI steady at 52.7 for a fourth straight month of growth. New orders increased, while production and deliveries stayed strong.
At the same time, the Flash U.S. Services PMI Business Activity Index for April stood at 51.3. According to S&P, service sector growth showed only a slight recovery from March. Demand cooled further, new business rose marginally at its slowest pace in two years, and falling exports weighed on activity. Firms cited war-related uncertainty, government policies, and affordability pressures as key reasons for lost sales.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by a MarketDash editor.
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