Analysis: An end to the Iran war may be just the beginning of a new era of U.S. inequality

For some Americans' finances, the Iran war was over almost as soon as it began. Those with access to stocks — a majority of Americans have some, though the ultrawealthy have most — saw the S&P 500 dip about 8% when the war started, only for it to bounce 19% starting in late March, more than making up its losses. The index is now up 10.7% for the year, which if it held would make for the fourth consecutive year of double-digit stock increases.

President Donald Trump has been quick to trumpet these gains. "We have 401(k)s at their all-time high, highest they've ever been, and that goes along with the stock market, which is the highest it's ever been," Trump said at a televised Cabinet meeting this week, repeating a refrain he has adopted to celebrate market wins. That is all despite the war, he said. 

But as Trump — along with anyone who has to put gas into their car — also knows, the real economic weight of the war is much heftier than lofty stock prices would suggest. The war is heightening an already historic disconnect between those who can share in the affluence spun off by U.S. financial markets and those who can't. That is aggravating Americas' frustrations with the president's economic performance, and likely will weigh on his fellow Republicans' performance in November's midterm elections. 

Trump won a return to the White House in large part because of his promises to rein in consumer prices, a pledge voters may feel is unfulfilled when they head to the ballot box.

A slew of new economic data shows the U.S. economy struggling to shrug off the effects of the war. Americans' purchasing power is falling, according to data released Thursday by the Bureau of Economic Analysis. Americans' real disposable income fell 0.2% in March and another 0.5% in April. Americans are getting through the energy crunch due to the war by slashing savings. The personal savings rate hit a dismal 2.6% last month, U.S. Bureau of Economic Analysis data showed. Growth in the first quarter was revised downward to just 1.6%. 

But the economy hasn't stalled out, in part because of that disconnect between the top and bottom halves of the population. Big U.S. companies are doing just fine — that, after all, is what makes up the S&P 500. It is workers, in aggregate, who are having a tough go of things. Although corporate profits are booming, labor's share of gross domestic income has fallen to 51%, the lowest in 79 years that records have been kept, the Wall Street Journal reported. 

The Iran war didn't create American inequality, but it hasn't helped. Researchers at the New York Federal Reserve found that since the war began, people in the Northeast earning less than $40,000 a year have cut back on gas purchases by nearly 10%, while those making over $125,000 have driven on with more disposable income. 

Nationally, those who can cut back are the lucky ones: Drivers in the Northeast are more likely to be able to switch to public transit than in many parts of the country. Elsewhere, people are more likely to have to have to close their eyes when they swipe their cards at the pump. Americans have spent an extra $447.19 on average on energy costs since the war began, according to analysis from Moody's.

Gas prices did fall in recent days after the Memorial Day holiday and summer travel season kickoff. The average cost of a gallon of gas declined by 16 cents on average nationwide this week, to $4.39, according to AAA, as the U.S and Iran seemed to circle a deal. 

A tenuous new agreement between the U.S. and Iran would reopen the flow of oil tankers from the Persian Gulf through the Strait of Hormuz. With both the U.S. and Iran refusing to allow vessels to transit the strait, some 100 million barrels a day of oil aren't reaching global markets. 

The U.S. produces more oil than any country in the history of the world, but it is hooked into the price-setting global markets. That is a double-edged sword. When the closure of the strait stopped shipments of jet fuel from gulf producers to Europe, American market ingenuity stepped in to fill the gap. U.S. refineries switched from gas for automobiles to jet fuel. Global supply catastrophe was avoided, at some cost to U.S. consumers.

Trump on Friday said he was making a final decision on a potential deal with Iran. Markets welcomed the news, with futures contracts for Brent crude oil falling about $1.70 to just below $92 a barrel. Stocks continued their rise.

But financial markets can adapt in seconds to changes that will take months to work out in the real economy. 

There are some 2,000 ships trapped inside the Persian Gulf. First, mines need to be cleared, then those ships need to be directed through the strait.

"You need weeks and weeks" to get those ships out, Chevron CEO Mike Wirth said Friday in an interview with Bloomberg. Other ships that have diverted to take energy supplies from the U.S. market to Asia and elsewhere will need to be diverted again. "It will take months," Wirth said. 

Companies and governments, including energy-hungry China, will need to rebuild their depleted inventories. Oil demand will be higher than it was before the war. Prices will rise compared with prewar days to meet this demand. 

And that all assumes a deal. If one doesn't come soon, prices are likely to resume their upward march. 

Much can change by November, but for now it is hard to see how Trump's party can escape the political consequences. Some 60% of Americans disapprove of his handling of the presidency, versus 37% who approve, according to polling aggregator Strength in Numbers.

But midterm politics is probably too narrow a frame to think about the consequences of increasing inequality. It is likely to scramble Democrats, too, as foreshadowed in the party's divides between its rising anti-corporate, progressive wing and the waning power of Clinton- and Obama-era free marketeers. 

The depth and bitterness of the divides between Americans who find themselves prospering in an artificial intelligence-driven stock boom and those who remain shut out is far more real to many Americans than the consequences of a war that is playing out half a world away. Of course, it is that alienation from the realities of U.S. power that made it so easy for Trump to go to war to begin with.

The deepening of the politics of inequality will play out in ways we can't yet foresee.