The battlefield is in the Gulf. The aftershocks could hit your grocery bill, your mortgage rate — and global markets.
Economists Warn the Iran War Could Trigger Prolonged Supply Disruptions, Inflation Pressures and Global Stagflation.
Financial markets appear calm. Oil has risen, but not yet spiraled. Equity indices remain resilient. Yet beneath the surface, economists warn that investors may be underestimating how deeply the Iran war could disrupt the global economy if it drags on.
The most visible risk lies in the Strait of Hormuz, the narrow corridor through which roughly one-fifth of global oil and a significant share of liquefied natural gas flows. Even partial disruption there can ripple instantly through energy markets. For Asia and Europe — still adjusting to reduced Russian gas supplies after the Ukraine war — Gulf hydrocarbons remain critical.
Energy is only the first domino.
Higher oil and gas prices quickly feed into transport, manufacturing and electricity costs. That pressure spreads to food production, logistics and consumer goods. If the conflict persists for weeks rather than days, energy markets could tighten further, pushing inflation back upward just as central banks were beginning to contemplate rate cuts.
The risk is not merely inflation. It is inflation combined with slowing growth — the toxic mix known as stagflation.
Less visible vulnerabilities compound the danger. Helium, produced as a by-product of natural gas extraction, is essential for semiconductor manufacturing and medical imaging. Qatar supplies roughly a third of global helium. Disruptions to production or shipping could strain technology and healthcare sectors far beyond the Middle East.
Sulphur, another hydrocarbon by-product used in copper processing and industrial manufacturing, faces similar exposure. Fertiliser markets are particularly sensitive. With planting seasons underway across much of the world, any bottleneck in fertiliser supply could reduce crop yields months from now — translating into higher food prices later in the year.
Even if fighting subsides quickly, restarting damaged infrastructure is not instantaneous. Oil terminals, gas facilities and shipping routes require time and security guarantees to resume normal operations. Meanwhile, insurers may raise premiums for vessels operating in the Gulf, adding hidden costs to global trade.
Businesses are also reassessing risk. Shipping firms may divert routes. Investors may delay projects. Tourism and expatriate talent flows into Gulf economies could slow. Those shifts do not reverse overnight.
The United States, though more energy independent than in past crises, is not immune. Oil prices are set globally. Higher fuel costs influence consumer spending, corporate margins and political sentiment.
If policymakers are forced to choose between combating inflation and supporting growth, the global economy could enter a period of instability reminiscent of past energy shocks — though under far more interconnected financial conditions.
Markets often assume conflicts will be short and contained. History suggests otherwise. Should the Iran war stretch into a prolonged confrontation, today’s modest price movements may prove to be only the opening tremor of a much larger economic adjustment.
