How the Middle East War is Unpredictably Chilling the American Job Market

When a truck driver pulls up to fill a commercial rig at a gas station in Elk Grove Village, Illinois, he observes the pump number spin past $500. The price of a barrel of oil is more than $100. The conflict between the United States, Israel, and Iran has choked the Strait of Hormuz, the narrow passage through which a significant portion of the world’s petroleum flows. This truck stop’s price increase is not unique to the area. It’s a signal that spreads to every supply chain and business decision related to the cost of transportation, which is practically everything in a modern economy.

Even before the initial strikes against Iran, the American labor market was already precarious. With only 116,000 new jobs added for the entire year of 2025, it was one of the worst results in decades outside of a real recession. The government’s closely monitored JOLTS hiring rate, which measures the number of companies actively hiring new employees, fell in February 2026 to reach its pandemic low of April 2020. Just that comparison ought to have been startling. Part of the reason it wasn’t getting the attention it needed was that the unemployment rate, which was still manageable at 4.4%, was covering it. On the surface, the market appeared to be doing well. The current was flowing in the wrong direction beneath.

The Middle East conflict hasn’t caused a crisis out of thin air. It has exerted pressure on a system that was already exhibiting stress fractures, causing them to widen at the wrong time. When she stated that if oil prices remain above $100 through April, “you’re talking about a very different economy, then you’re talking about layoffs re-entering the picture,” Heather Long, chief economist at Navy Federal Credit Union, put it simply.” Currently, the majority of economists’ assessments heavily rely on that conditional, if. To be honest, no one knows how long this will last.

The first significant corporate reaction came swiftly. A memo announcing a three-month hiring freeze was sent to employees by Unilever, the company that owns Vaseline, Dove soap, and numerous other consumer brands found in almost every American home. “Macroeconomic and geopolitical realities, especially in the Middle East conflict” was the executive’s explanation. Unilever is a big business that operates in dozens of markets and is subject to consumer sentiment, input prices, and transportation costs. It’s worth pondering for a while when a soap and shampoo company chooses to halt hiring due to a conflict in the Persian Gulf. Geopolitical shock can have a startlingly direct effect on corporate behavior.

Every sector is affected by the energy math. Since the start of the war, the average US gas price has increased by about $1 per gallon, bringing the national average down to slightly less than $4. According to energy economists, the increased expenses for utilities, gas, and heating could effectively lower household income by over $1,350 per year. Families that spend the majority of their income on necessities and have the least buffer to absorb it are most affected. About two-thirds of US economic activity is made up of consumer spending. The labor market is affected downstream in retail, dining, travel, entertainment, and services when consumers retreat, which they typically do when energy prices rise. According to Goldman Sachs analysts, the unemployment rate could reach 4.6% by September, with hiring reductions in the arts, entertainment, lodging, and food services likely to occur first.

When describing the current labor market, economists have been using a specific vocabulary that is instructive. “Stable but stagnant.” “Cooling, not cracking.” “Low-hire, low-fire.” These expressions are making an effort to explain something that doesn’t neatly fall into the typical recession-or-not dichotomy. According to a recent Dallas Fed paper, the break-even level of monthly job creation required to maintain stable unemployment has drastically decreased, from roughly 250,000 per month three years ago to practically zero now. This implies that even when the economy hardly generates any new jobs, the unemployment rate can stay comparatively stable. It’s an odd and delicate balance. This vulnerability was not created by the war. It located it.

How long the conflict lasts and what happens to oil if it does are still genuinely unknown. According to Conference Board analysis, oil prices would need to hit $140 per barrel before the US economy enters a recession and the labor market begins to show signs of instability. The current price of Brent crude is about $102. Although there is a gap, it doesn’t feel particularly comfortable, and the direction of travel is more important than the current number. Gregory Daco of EY-Parthenon has described the current phase as uncertainty “delaying, not canceling, hiring plans”—a reading that seems reasonable until you take into account that delays become more difficult to undo if they persist for a long enough period of time.

There’s something instructive about the particular nature of this uncertainty when you watch this unfold from a distance. It’s not a pandemic, a financial crisis, or a shock to domestic policy. A London-based personal care company’s labor decisions are being shaken by a war taking place on the opposite side of the world over a waterway that most Americans couldn’t find on a map. The global system in which the American economy is deeply embedded now has a pressure point that no one can completely control. There was a brief sense of relief when the March jobs report came in higher than anticipated at 178,000. However, the survey for that report was gathered in the middle of the month, just a few weeks after the conflict started, before business decisions had fully been impacted by the energy shock. The true picture is still developing.