Wolfe Research says the economic damage from the Iran conflict has been muted so far, but that the underlying shock may be building out of sight. The firm points to a mix of temporary but strong offsets that have kept headline indicators healthy even as crude oil traded near $100 a barrel.
Analyst Stephanie Roth noted consumer spending through April remained solid, first-quarter GDP growth was strong, and early labor-market signals suggested hiring was improving. Wolfe attributes this resilience chiefly to two forces: fiscal stimulus from the One Big Beautiful Bill and an ongoing rise in AI-related capital expenditure.
On fiscal measures, Wolfe estimates the One Big Beautiful Bill has provided about $188 billion in total consumer stimulus. That estimate includes roughly $35 billion in tax refund checks. According to Wolfe, those fiscal transfers have more than offset the current consumer cost from elevated gasoline prices, which Wolfe places at an estimated $20 billion to $30 billion to date.
On the investment side, Wolfe calculates that domestic AI-related capital spending is running at about $582 billion on an annualized basis, equivalent to roughly 1.8% of GDP. The firm attributes nearly one-quarter of nominal GDP growth in the first quarter to AI-related capital expenditure. When AI-related imports are included, Wolfe's estimate of total AI investment reaches about $770 billion annualized.
"While the impact from the war and ~$100 WTI hasn't cracked the economy yet, that doesn't mean the shock isn't building," Roth wrote.
Wolfe Research highlights three specific risks that could reverse the current economic buoyancy. First, a further sustained crude price increase in the order of $30 to $35 could push retail gasoline above $5 per gallon and begin to inflict more material harm on consumer spending. Roth reiterated this threshold in writing: "It would likely take another sustained ~$30-35 increase in crude, pushing gasoline prices above $5, to begin to do more material damage."
Second, a slowdown in AI investment could remove a major source of growth support given its outsized contribution to recent nominal GDP gains. Third, tighter financial conditions pose a separate threat by raising borrowing costs and weighing on both household and corporate spending decisions.
Taken together, Wolfe's analysis suggests that current economic strength may be fragile if any of those three developments materialize. For now, strong fiscal transfers and robust AI capital spending have masked the near-term effects of higher crude on household budgets and on aggregate demand.
Sectors affected: Consumer spending and retail gasoline demand; technology and capital equipment tied to AI; financial markets and credit-sensitive sectors.