In the first week of the U.S.–Israel war with Iran, the economic ripples were looking pretty minimal. But as Week 2 begins, the risks to the global economy are growing much more serious, Axios' Neil Irwin writes.

• You can't decapitate the leadership of a country of 90 million people, with expansive military and intelligence capabilities, in the heart of some of the world's most economically important supply chains, without a huge cost.

Oil skyrocketed 25% overnight, to just under $120 a barrel, fueling worries that higher energy costs will stoke inflation and curb spending by U.S. consumers. Tokyo's Nikkei 225 index plunged more than 5%.

• That's the highest oil price since about four years ago, when energy prices surged due to Russia's invasion of Ukraine.
• Patrick De Haan — a widely cited gas price expert and an analyst for GasBuddy — estimates an 80% chance the national average gas price will hit $4 per gallon in the next month. It's currently $3.48.

Zoom in: As of 5 a.m. ET, a barrel of the global crude oil benchmark was going for about $107 on futures markets, up 15% from Friday and 47% from 10 days ago, before the Iran attack. Brent crude prices approached $120 overnight before receding on reports of coordinated global action to release oil reserves.

The risk of a broader economic slump is rising with the disruption to oil supplies. S&P 500 futures are down 1.3% overnight, setting Wall Street up for its third consecutive day of losses.

• Japan's Nikkei index was down 5.2% and South Korea's KOSPI down 6%, reflecting those economies' more direct dependence on Middle Eastern oil now at risk of a protracted blockade.

🔮 The odds of a U.S. recession this year spiked to 38% in overnight trading on Polymarket, from 24% at the start of the month.

• The war has already caused the largest oil disruption in history, taking out roughly 20% of the world's supply, according to Bob McNally, president of Rapidan Energy and a former George W. Bush energy adviser.

Between the lines: Solid GDP growth is no consolation for higher day-to-day prices, which doomed President Biden's popularity.

• If the recent energy price surge is sustained, that will be President Trump's burden as well.

🥊 Reality check: The U.S. economy has proven exceptionally resilient to global shocks — including throughout the Ukraine war, which initially caused an unpleasant spike in prices but not a recession.

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This exclusive reporting from Axios' Barak Ravid and Marc Caputo takes you inside the first major U.S.-Israel rift of the Iran war:

Israel's strikes on 30 Iranian fuel depots went far beyond what the U.S. expected when Israel notified it in advance — sparking the first significant disagreement between the allies in more than a week of fighting, according to a U.S. official, an Israeli official and another source with knowledge.

• Why it matters: The U.S. is concerned Israeli strikes on infrastructure that serves ordinary Iranians could backfire strategically, rallying Iranian society to support the regime and driving up oil prices.

The Israeli air force's strikes created large fires in Tehran, igniting flames visible for miles and blanketing the capital in heavy smoke.

• An Israeli military official said the strikes were intended in part to tell Iran to stop targeting Israeli civilian infrastructure.

🔎 Behind the scenes: Israeli and U.S. officials said the IDF notified the U.S. military ahead of the strikes.

• But a U.S. official said that the U.S. military was surprised by how wide-ranging they were.
• "We don't think it was a good idea," a senior U.S. official said.
• An Israeli official said the U.S. message to Israel was "WTF."

🖼️ The big picture: U.S. officials are concerned the footage of burning depots could spook oil markets and push energy prices even higher.

• "The president doesn't like the attack. He wants to save the oil. He doesn't want to burn it. And it reminds people of higher gas prices," a Trump adviser told Axios.

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Iran's new supreme leader — Mojtaba Khamenei, son of the country's slain ruler — is expected to be more hardline than his father, and his ascent means the Iranian regime may become more repressive, Axios' Josephine Walker writes.

• Mojtaba, 56, was appointed by the country's Assembly of Experts — a council of 88 clerics.
• Mojtaba has close ties to some of the most "ideologically extremist clerics" who have been at the forefront of the regime's most violent crackdowns.

🔎 Between the lines: Political figures within Iran criticized the idea of handing over the supreme leader's title based on heredity and thereby creating a clerical version of the rule of the shah, who was toppled during the 1979 Islamic Revolution, AP notes.

• Share this story ... Barak Ravid contributed reporting.

Defense Secretary Pete Hegseth, asked about House Speaker Mike Johnson's assertion that Operation Epic Fury's "mission is nearly accomplished," told Major Garrett on CBS News' "60 Minutes":

• "Oh, we're very much on track, on plan. ... We're not flying a 'Mission Accomplished' banner ... But we can be clear with the American people that this is not a fair fight."
• "And that's on purpose. Our capabilities are overwhelming compared to what Iran's are. And frankly, when you combine our Air Force with the air force of the Israeli Defense Forces, it's the two most powerful air forces in the world."
• "The ability for us to be up over the top and hunting with more conventional munitions — gravity bombs, 500-pound, 1,000-pound, 2,000-pound bombs on military targets ... We haven't even really begun to start that effort of the campaign, which is gonna showcase even more how we will execute on those objectives."

Read the transcript ... Watch the segment.

Travelers complained of long waits yesterday — lasting hours in some cases — at security checkpoints at airports in Houston and New Orleans, which officials blamed on a government shutdown of the Department of Homeland Security.

• Why it matters: TSA agents are expected to work without pay during the shutdown, which began Feb. 14. Democratic lawmakers have said DHS won't get funded until new restrictions are placed on federal immigration operations.

The estimated wait time at the standard security checkpoint at William P. Hobby Airport in Houston yesterday evening was at one point three hours.

• 🤬 Hobby Airport lit up X with an advisory saying passengers "should arrive 4-5 hours before their flight."

⚜️ Louis Armstrong New Orleans International Airport urged travelers to arrive at least three hours before their flights and said wait times could last up to two hours.

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Axios Colorado Springs — written by Glenn Wallace — launches today as Axios Local's 35th city.

• Five years ago, we launched in Charlotte. Today, we have nearly three dozen newsletters with full-time journalists on the ground.

Our next frontier: Seven new suburbs to explore what it takes to build viable local journalism in smaller communities.

• Get Axios Colorado Springs ... 34 more local cities.

Sean Hannity, the longtime Fox News star and syndicated radio host, will add yet another platform tomorrow when he launches a twice-weekly podcast, "Hang Out with Sean Hannity."

• Why it matters: Even hosts with massive audiences on TV and radio see podcasting as a way to reach new audiences.

The first episode, dropping tomorrow at 7 a.m. ET, features Hannity talking to Stephen A. Smith, the ESPN provocateur and potential presidential candidate, on the podcast's set in South Florida.

• Other upcoming guests include Sen. John Fetterman (D-Pa.), former New York Mayor Bill de Blasio (Hannity made him a margarita), and Team USA hockey gold medalist Matt Tkachuk.

🎧 Hannity says in a statement to Axios: "This show isn't about chasing the news cycle — it's about the people living inside it. ... The podcast will be curious, irreverent and a lot less buttoned-up. No countdown clocks, no talking points."

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Pixar's new movie "Hoppers" delivered $46 million in domestic ticket sales over the weekend — the legendary animation studio's biggest opening for an original film in nearly a decade.

• The movie — about a 19-year-old environmentalist who infiltrates the animal world in the body of a beaver — narrowly trailed the studio's 2017 hit, "Coco," at the box office.

Why it matters: "Pixar, whose core mission is to tell original stories, used to be able to do no wrong. But in recent years, Pixar has taken a drubbing for films that stalled out theatrically, excluding franchise installments such as 2024 blockbuster Inside Out 2," The Hollywood Reporter notes.

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