Risk of Iranian conflict rattles investors. But a serious economic hit looks unlikely.

But the economic impact of an escalating conflict in the Middle East remains far from clear. Economists - for now, at least - appear to agree that a limited military confrontation wouldn't mean much to U.S. growth.

"The economic and financial fall-out from Friday's events seems likely to be minor," Macroeconomic Advisors economists wrote, referencing the U.S. military drone attack that killed Iranian Maj. Gen. Qasem Soleimani at the Baghdad airport. In response, the Iranian regime has announced it is suspending its commitments under the 2015 nuclear deal and will attack military sites.

"The direct economic impact would be on the collective psyche, equity prices and oil prices," Ryan Sweet, director of real-time economics at Moody's Analytics, writes. "By itself, a military conflict between the U.S. and Iran would have modest implications for the U.S. economy, but the spillover impact on oil prices could be more significant."

Indeed, oil prices are already jumping on fears that Middle Eastern infrastructure will get caught in the crossfire. But even unraveling what a sustained increase in the cost of the commodity will mean at home is debatable.

"Higher oil prices represent a tax on oil consumers and a windfall for producers," Pantheon Macroeconomics chief economist Ian Shepherdson writes. "World oil consumption is about 100M barrels per day, so each five dollars on the price of oil is equivalent to an annualized tax of about $183B per year, or 0.1% of global GDP."

But since the United States is now both a major oil producer and consumer, higher oil prices could benefit the economy by encouraging the domestic energy sector to invest in expanding its capacity. That dynamic has played out over the past half-decade. "When oil prices collapsed between spring 2014 and early 2016, the ensuing plunge in capital spending in the oil sector outweighed the boost to consumers from cheaper gasoline and heating oil, and overall economic growth slowed markedly," Shepherdson writes. "This story played out in reverse when oil prices rebounded in the three years through spring 2018, and economic growth picked up."

Consumers - the primary engine of American economic growth - should be able to withstand the pinch of higher prices at the pump in the immediate term, per Michael Pearce, senior U.S. economist for Capital Economics. "Labor market conditions remain solid, the household saving rate is elevated, and consumer confidence remains high," he writes.

And the Federal Reserve is unlikely to change its outlook based on escalating tensions, per a note from Larry Meyer, a former Fed governor and founder of Washington-based research firm LH Meyer. The conflict is not "anywhere close" to weighing on Fed policymaking "at this point," he writes.

Then again, the picture could change if the conflict snowballs into a full-scale war. "The wild card is whether turmoil in the Middle East triggers a sustained sell-off in equities, depressing business and consumer confidence to the point where labor market and inflation concerns become secondary," Shepherdson writes. "We'd be surprised - the drop in the S&P on Friday was just the initial knee-jerk response - but if Iran takes more drastic action than we are expecting, it will become a real risk."

Or as Fundstrat analyst Vito Racanelli puts it, "Once hostilities begin, predictions go out the window."