No. Let me say that again. No.
A “Black Swan” is a sudden change in circumstances of epic proportions brought about by a single, major event that causes an economic shakeup. The war in Iran is not one of them.
The war in Iran has caught everyone off guard, to be sure, and businesses across the country are trying to understand what its impact can be on the economy and construction in particular, as oil prices spike and consumer confidence takes a sharp nosedive.
Everyone needs to calm down.
Last month, I wrote about the strength in employment and my optimism that the economy will stay strong for the foreseeable future, driven by the 250-mph tailwind of AI. Just a month later, we find employment numbers being restated downwards and in a war in Iran, resulting in an increase in gas prices worth $300 million overall to American consumers in just the first month.
When the estimated $5.5 trillion in fiscal stimulus began flowing through our economy in an effort to stave off the possibility of a fiscal collapse during the peak of the pandemic, it resulted in a disruption to the supply chain of epic proportions to sparked inflation, and the talking business heads, i.e. Chicken Littles, started warning of an imminent recession, I was alone is beating my drum that a recession would not happen, and I was right. I say so again here.
History is Instructive
In October 1973, the second month of my business career, fresh out of college, President Richard Nixon faced an affordability crisis, a worsening economy and mounting legal problems. In the run-up to the 1972 election, he had challenged the Federal Reserve’s independence and pressured its chair to cut interest rates. Now the bill was coming due in the form of fast-rising inflation.
Then came a fresh conflict in the Middle East. Egypt and Syria invaded Israel, launching the Yom Kippur War. The price of oil was already rising sharply when Arab producers imposed an embargo, cutting supplies in protest at the U.S.’s support for Israel. Sound familiar?
The defining image of the 1973-74 crisis in America was long lines at gas stations. People panicked as the government-imposed rationing, and drivers waited for hours at a time to fill up. Many drove from station to station, topping up their tanks with a dollar or two of gas to keep them full in case the shortages got worse. The lines created a psychology of scarcity and a fear of running short that far outran the reality.
Energy Alternatives
Energy crises set off a search for alternatives to oil and gas. By the end of the 1970s, after years of higher gas prices, Americans bought increasing numbers of small, fuel-efficient cars, with Hondas and Volkswagens replacing the gas-guzzling behemoths made in America. They wanted Civics and Rabbits, not Buick Rivieras.
Today, major car manufacturers are reversing years of investments in electric vehicles, a decision they may regret if gasoline prices go higher and stay there. War has reminded us of the choke points of the oil and gas supply chains, and any further disruptions will only accelerate the trend towards alternatives.
But unlike 1973-74, which spawned the modern era of energy exploration and production on American shores and in its shale regions, we are now a self-reliant net exporter of oil, so the likelihood of gasoline lines is remote. Add to that the impact of a new economic engine in the economy, which didn’t exist in 1973, and I will reiterate that our economic outlook is stable.
The Fed estimates that AI‑related investment categories (software, computing equipment, R&D tied to AI) contributed about 0.9 to 1.0 percentage points to real U.S. GDP growth over the first three quarters of 2025, or roughly 20% to 40% of total growth in that period, depending on how imports are treated. This huge addition to GDP will continue for years to come, and this trend bodes well for the outlook for our economy, especially for construction.