Recent U.S. and Israeli military actions against Iran have significantly impacted global economic conditions, leading to soaring prices, a gloomy economic outlook, and heightened volatility in global stock markets. The conflict has forced developing nations to ration fuel and subsidize energy costs to safeguard their poorest citizens.
Continued strikes and counterstrikes on critical infrastructure in the Persian Gulf, including refineries, pipelines, and gas fields, threaten to prolong the global economic crisis for months, if not years. Christopher Knittel, an energy economist at the Massachusetts Institute of Technology, observed that the destruction of infrastructure has long-term implications for the region's economic stability.
One significant incident occurred when Iran targeted Qatar's Ras Laffan natural gas terminal, responsible for producing 20% of the world's liquefied natural gas (LNG). A strike on March 18 resulted in a 17% reduction in Qatar's LNG export capacity, with repairs estimated to take up to five years, as reported by state-owned QatarEnergy. Following U.S. and Israeli attacks on February 28, Iran effectively sealed off the Strait of Hormuz, a crucial transit route for nearly a fifth of global oil supply. This action led Gulf oil exporters, such as Kuwait and Iraq, to reduce production, resulting in what the International Energy Agency (IEA) has termed the "largest supply disruption in the history of the global oil market."
Consequently, the price of Brent crude oil surged by 3.4% to settle at $105.32 per barrel, up from approximately $70 prior to the outbreak of the conflict, while benchmark U.S. crude climbed by 5.5% to $99.64. Such oil price shocks have historically been followed by global recessions, raising concerns about the risk of stagflation, as warned by Harvard Kennedy School's Carmen Reinhart.
Gita Gopinath, former chief economist at the International Monetary Fund (IMF), indicated that the anticipated global economic growth of 3.3% for the year could decrease by 0.3 to 0.4 percentage points if oil prices average $85 per barrel in 2026. Furthermore, the war has caused shortages and price increases for fertilizers, particularly nitrogen fertilizers, which are critical for agriculture. The Persian Gulf is a major exporter of these fertilizers, and the blockage of the Strait of Hormuz has driven urea prices up by 50% and ammonia prices by 20%. This situation presents challenges for agricultural producers, especially in Brazil, which relies heavily on fertilizer imports.
As fertilizer prices rise, food costs are expected to increase, leading to food scarcity and impacting poorer families the hardest. The conflict has also disrupted helium supply, a byproduct of natural gas essential for industries such as chipmaking and medical imaging, with Qatar supplying a third of the world's helium.
Poorer countries are disproportionately affected by these energy shortages, as they are outbid for remaining oil and gas supplies. The International Energy Agency's head, Fatih Birol, warned that "no country will be immune to the effects of this crisis if it continues." In Asia, over 80% of oil and LNG transiting through the Strait of Hormuz is destined for the region, exacerbating its vulnerability.
Countries like the Philippines are now operating government offices only four days a week, limiting air conditioning use, while Thailand has instructed public workers to use stairs instead of elevators. In India, which heavily imports liquefied petroleum gas (LPG), households are given priority over businesses amid existing shortages, affecting restaurants that rely on LPG for cooking. South Korea, dependent on energy imports, has reinstated fuel price caps and restricted car usage by public employees.
While the United States, being the world’s largest economy and an oil exporter, enjoys some insulation from these energy supply issues, rising gasoline prices are causing consumer anxiety amid an already high cost of living. As of March, the average price of gasoline increased to nearly $4 per gallon from $2.98 a month prior. The U.S. economy was exhibiting signs of weakness, with a growth rate of only 0.7% from October to December 2025, compared to a more robust 4.4% the previous quarter. Consequently, there are increased concerns over a possible recession within the next year, with the risk of recession raised to 40%.
Despite previous resilience against economic shocks, including the COVID-19 pandemic and the invasion of Ukraine, the ongoing conflict in Iran continues to threaten not only the Gulf’s energy infrastructure but also broader global economic stability. Analysts predict that the damage to LNG facilities in Qatar may take years to rectify, complicating the recovery process even under optimal circumstances.
