The Cost of War: How the Iran Conflict Is Reshaping Global Markets and Daily Life
One month into the crisis, the closure of the Strait of Hormuz has triggered cascading disruptions across energy, food, and industrial supply chains, pushing up costs for households worldwide and threatening to derail a fragile economic recovery.
KASHMIR — March 27, 2026 — On February 28, when US and Israeli forces launched joint strikes on Iran, the world braced for a regional war. Few anticipated that within a month, the conflict would effectively close the Strait of Hormuz — the narrow waterway through which one-fifth of the world’s oil, one-third of globally traded nitrogen fertilisers, and up to 30 percent of international fertiliser trade normally passes .
What began as a military confrontation has metastasised into a global economic crisis. From the rice paddies of Bangladesh to the cornfields of Iowa, from factory floors in South Korea to dinner tables in Zambia, the war’s shockwaves are now being felt in surging fuel bills, looming food shortages, and the creeping realisation that even a swift resolution will take months to undo the damage.
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In its latest interim Economic Outlook, the Organisation for Economic Co-operation and Development (OECD) delivered a stark verdict: the war has erased a projected 0.3 percentage point upgrade to global growth. Where preliminary indicators had pointed to a stronger 2026, the conflict has now all but wiped out those gains . Global GDP is now projected to ease from 3.3 percent last year to 2.9 percent in 2026, with inflation across G20 economies expected to hit 4.0 percent — 1.2 percentage points higher than previously forecast .
“The escalating conflict in the Middle East has knocked the global economy off a stronger growth path,” OECD Secretary-General Mathias Cormann told journalists, adding that “there’s a high level of uncertainty around the duration and the magnitude of the current conflict” .
I. The Chokepoint: How the Strait of Hormuz Became a Weapon
For weeks, the Strait of Hormuz — the 21-mile-wide passage between Iran and Oman — has been effectively closed. Before the war, more than 100 vessels transited the strait daily, carrying approximately 20 million barrels of crude oil, along with liquefied natural gas (LNG), fertilisers, petrochemicals, and industrial gases . Today, only a handful of ships are passing through .
The blockade is not a formal closure but the cumulative effect of Iranian missile and drone attacks on vessels and infrastructure, combined with the near-total suspension of shipping by companies unwilling to risk their crews and cargo. The Gulf Cooperation Council (GCC) warned on March 26 that Iran’s actions have “crossed all red lines,” calling the situation an “international responsibility” with consequences that will “100 percent destabilise international stability” .
Morgan Stanley analyst Natasha Kaneva told the Financial Times in early March that “in the written history of the Strait of Hormuz, it has never actually been closed — not once.” The current situation, she said, is “not just a worst-case scenario, but an unimaginable one” .
The economic impact has been swift and severe. Brent crude prices surged more than 50 percent in the first week of the conflict, briefly touching $119.50 per barrel on March 9 — the highest level since the onset of the COVID-19 pandemic . While prices have since retreated to around $92 per barrel following diplomatic overtures, they remain well above pre-war levels of approximately $72, and volatility persists .
II. Fuel: The Immediate Pain
For households across Asia — the region most dependent on Gulf energy — the pain was immediate.
In the Philippines, President Ferdinand R. Marcos Jr. declared a national energy emergency on March 24, citing the Strait of Hormuz closure as a direct threat to the country’s fuel supplies . The Philippines imports nearly all of its crude oil from the Middle East. Jeepney drivers, who form the backbone of public transport, have seen their daily earnings collapse from 1,000 to 1,200 pesos ($16.60–$19.92) to as little as 200 pesos ($3.32) .
In Sri Lanka, which emerged from a devastating financial crisis in 2022 only to be plunged back into fuel rationing, long queues have become a daily ordeal. “During the previous time, the country did not have money to buy fuel. Now, the country has money, but there is no fuel for us to buy,” one Colombo resident told the BBC .
Bangladesh has implemented emergency fuel rationing, limiting motorcycles to two liters per day and private cars to 10–15 liters, though panic buying has left many stations selling out by midday . In Dhaka, residents queue for hours to obtain government-allocated gasoline .
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Thailand has ordered government agencies to shift to remote work and asked citizens to set air conditioners to 26-27°C. Even news anchors have removed their suit jackets on air to promote energy conservation . The government has also suspended some fuel exports to preserve domestic supplies.
Myanmar’s military-backed authorities have implemented an alternate-day driving policy for private vehicles, forcing residents to plan social gatherings based on odd- or even-numbered license plates .
In the United States, gasoline prices rose 16 percent in the week following the initial strikes, reaching a national average of $3.41 per gallon on March 7. California’s average topped $5 per gallon . While the US — now a major energy producer — is more insulated than many nations, the impact on household budgets has been palpable. “I knew prices were going to go up. I could handle it, but some people really need a price buffer, and they’re not seeing it,” a Louisiana resident told the Associated Press .
III. The Next Crisis: Fertiliser and Food
If fuel is the immediate shock, fertiliser is the coming storm.
Approximately one-third of the world’s nitrogen-based fertilisers — including urea, ammonia, and phosphates — normally pass through the Strait of Hormuz . QatarEnergy, which accounts for roughly 10 percent of global urea trade, has halted production at its Ras Laffan complex following a drone attack, while Iran has taken ammonia production offline .
Goldman Sachs warned in a report dated March 24 that nitrogen fertiliser prices have already risen 40 percent since the start of the conflict, and the knock-on effects are likely to intensify . More than a quarter of the global nitrogen fertiliser trade moves through the strait each year, creating a “dual constraint”: disruptions not only restrict fertiliser shipments but also raise production costs globally, since natural gas — the primary feedstock for nitrogen fertiliser — is also shipped through the same route .
The timing could not be worse. March and April are the northern hemisphere’s planting season — the critical window when crops need nutrients. “A relatively brief closure could disrupt an entire growing season, with food security consequences that persist long after the strait reopens,” researchers at the Kiel Institute for the World Economy warned .
Goldman Sachs estimates that fertiliser accounts for about 20 percent of grain production costs, and a sustained price increase could push food prices higher by around 1.5 percent this year, adding roughly 0.1 percentage points to headline inflation . But the firm cautioned that the larger risk lies not in higher input costs but in reduced crop output. Farmers may apply less fertiliser or apply it late — directly affecting yields — or shift acreage toward crops that require less fertiliser, such as soybeans .
The Kiel Institute projects that a full closure of the Strait of Hormuz could push up global wheat prices by 4.2 percent and fruit and vegetable prices by 5.2 percent. The most badly affected countries in terms of overall food price increases would be Zambia (31 percent), Sri Lanka (15 percent), Taiwan (12 percent), and Pakistan (11 percent) .
Maximo Torero, chief economist of the UN Food and Agriculture Organization (FAO), warned on March 26 that even if the conflict ended immediately, the impact on global commodity markets would take two to three months to stabilise . “If this crisis continues for three to six months, then yes, it will have an impact, not only on the food security sector, but of course, energy will impact all other sectors and other inputs,” he said .
IV. Beyond Food: Helium, Medicines, and Smartphones
The war’s reach extends into the most sophisticated corners of the global economy.
Qatar’s Ras Laffan plant, one of the world’s largest producers of helium — a byproduct of natural gas production — has shut down following Iranian missile strikes . Helium is essential for manufacturing semiconductor wafers, which are processed into the microchips used in computers, vehicles, and household appliances. It is also critical for cooling the magnets in MRI scanners used in hospitals.
Analysts have warned of potential disruptions to supplies of smartphones, data centre equipment, and medical imaging devices. “MRI machines require somewhere between 1,500 to 2,000 litres of helium to cool the magnets,” Prashant Yadav, a senior fellow for global health at the Council on Foreign Relations, told the BBC. “People like to think helium’s predominant use is in data centres, semiconductors and cooling for the AI and data industry. But we can’t forget that helium is quite important for MRIs and for other medical users” .
Petrochemical derivatives such as methanol and ethylene — vital materials in the production of pharmaceuticals, including painkillers, antibiotics, and vaccines — are also facing supply disruptions. Gulf Cooperation Council countries account for approximately 6 percent of global petrochemical production capacity, with about half of these exports destined for Asia . Many pharmaceutical products are normally flown to global markets via Gulf hub airports, particularly Dubai, which have been severely disrupted by the conflict .
Sulphur — another byproduct of oil and gas processing — is essential for metal processing. Sulphuric acid, derived from sulphur, is used to process copper, cobalt, and nickel and to extract lithium — all critical for battery production for electric vehicles, consumer electronics, and military hardware . Prolonged disruptions could feed into higher prices for everything from laptops to electric cars.
V. The Macroeconomic Picture: A Fragile Recovery Undone
The OECD’s interim Economic Outlook, released March 26, captures the scale of the damage. The global economy had been on course for stronger-than-expected growth before the war, driven by technology investment, lower effective tariff rates, and momentum from 2025. That prospect has now “all but disappeared” .
Under the OECD’s baseline scenario — which assumes energy market disruption moderates over time, with prices declining gradually from mid-2026 — global growth will ease to 2.9 percent in 2026, while G20 inflation will hit 4.0 percent, 1.2 percentage points higher than previously expected .
In an adverse scenario where energy prices peak higher and stay elevated longer, global growth would be 0.5 percentage points lower by the second year of the shock, and inflation would be 0.9 percentage points higher .
Fitch Ratings has modelled a more severe scenario, warning that an extended conflict lasting through the first half of 2026 would reduce global real GDP by approximately 0.8 percent after one year compared to its baseline forecast. Under this scenario, US growth would slow to 1.5 percent, China’s expansion would dip below 4 percent, and the eurozone would fall below 1 percent .
By the fourth quarter of 2026, Fitch projects, US real GDP growth would drop to 0.6 percent year-on-year, compared with 1.8 percent in the baseline outlook. Global growth would slow to 1.7 percent instead of 2.5 percent .
Inflation would rise by about 1.3 percentage points across Fitch’s 20 major economies, with India, Poland, and Türkiye potentially seeing inflation climb by more than 2 percentage points .
VI. Regional Vulnerabilities: Asia Bears the Brunt
The war’s impact is profoundly uneven. Energy-importing economies — particularly in Asia — face the steepest costs.
The United States is relatively insulated. It is now a major energy producer, and its strategic petroleum reserves — currently about 4.15 billion barrels — provide a buffer. The Trump administration has authorised the release of 172 million barrels and plans to replenish about 200 million barrels over the coming year .
Europe, while dependent on Qatari LNG, is less exposed than Asia to the Strait of Hormuz disruption, though the loss of Qatari LNG shipments has already pushed European gas prices up approximately 70 percent since late February .
Asia is a different story. According to US Energy Information Administration data, China, India, Japan, and South Korea together account for about 69 percent of the crude and condensate shipped through the strait, and about 84 percent of overall traffic flows to Asia .
For India, the world’s third-largest oil importer, the stakes are enormous. The country imports approximately 85 percent of its liquefied petroleum gas (LPG) — used for cooking in millions of households — and about 50 percent of its LNG from the Middle East . In the northern city of Gorakhpur, residents queue from 3 a.m. for subsidised cooking gas cylinders .
South Korea and Japan are similarly exposed. Both nations depend on the strait for the majority of their energy imports and are also major consumers of petrochemical products and fertilisers.
Torero of the FAO also highlighted the vulnerability of countries heavily dependent on remittances from Gulf workers. “Workers in the region will lose their jobs, and of course they won’t be able to submit their remittances,” he said, naming Nepal, Jordan, Lebanon, Pakistan, Egypt, and Sri Lanka as nations where a significant share of GDP could be at risk .
VII. Political Consequences: The War Comes Home
In the United States, where the Trump administration launched the military campaign, the war has already begun to shape domestic politics.
A March 7 NBC poll found that 62 percent of US voters disapprove of Trump’s handling of inflation and the cost of living — a 7-point increase from the previous year . Sixty-one percent of independent voters oppose US military action in Iran, while only 27 percent of respondents overall support the war .
Anti-war protests have erupted in dozens of US cities. In New York, rallies at Times Square and Union Square have drawn students, peace activists, and Iranian-Americans. Demonstrators have called on Congress to reassert its constitutional authority to authorise military action, following the March 5 House vote that narrowly defeated a resolution requiring Trump to seek congressional approval for further strikes .
The war has also fractured Trump’s MAGA coalition. John Fitzpatrick, a Trump supporter from 2024, told Reuters he would welcome regime change in Iran — but only if the US avoids committing ground troops. Taylor Witzgor, another supporter, expressed concern that the White House lacks “a clear follow-up plan.” “I voted for Trump mostly on economic and domestic issues,” he said. “I don’t want him to shift his focus too much overseas” .
Trump has dismissed the political risks, telling supporters that higher oil prices are “temporary” and a “small price to pay for the security and peace of the United States and the world” . His administration has signalled a desire to end the war quickly. White House Press Secretary Karoline Leavitt said Trump “doesn’t bluff” and is “ready to unleash hell” if Iran does not agree to a peace deal, but the Wall Street Journal reported that Trump has told aides he wants the war concluded swiftly .
VIII. The Diplomatic Path: A 15-Point Proposal
The prospect of a ceasefire has become the central variable in global markets.
Reports have emerged that the United States has transmitted a 15-point peace proposal to Iran. Trump has claimed that Iran is “eager” to strike a deal and that the country’s military capacity has been “obliterated” . Iranian officials have publicly denied holding direct talks, with one telling Tasnim News that “from the beginning of the war until today, messages have been sent to Tehran from some mediators, the clear answer of which has been that we will continue to defend until we achieve the necessary deterrence” .
Nevertheless, diplomatic channels remain active. Iran has indicated it may allow “non-hostile” foreign vessels to pass through the Strait of Hormuz — a significant concession that could ease the energy supply crisis .
The OECD’s baseline forecast assumes a gradual moderation of energy market disruption from mid-2026 onward . The FAO’s Torero has been more specific: “If everything is resolved in the next two weeks or so, the markets will absorb, and that will minimise any potential risk of food insecurity in the world in the next planting season, or any potential risk of economic impacts” .
But if the crisis continues for three to six months, Torero warned, the consequences will be “significantly worrisome” — not only for food security but across all economic sectors .
IX. Looking Ahead: A World More Expensive, More Uncertain
Even under the most optimistic scenario — a ceasefire within weeks — the war’s economic legacy will linger for months, possibly years.
QatarEnergy has warned that repairs to its damaged LNG facilities will take three to five years . Norsk Hydro has estimated that restoring aluminium production in Qatar could take six to 12 months . Global supply chains, already fractured by the COVID-19 pandemic and the war in Ukraine, have been dealt another blow.
For households around the world, the calculus is simple: everything that moves, is grown, or is manufactured now costs more.
In Bangladesh, where the government has rationed fuel and asked universities to close early for the Eid holiday, residents fear the crisis has only just begun. “If this continues, it will put enormous pressure on the economy,” one Dhaka resident told CNN. “Our situation will be very bad” .
In the American Midwest, farmers face a choice between paying record prices for fertiliser or planting less corn, knowing that whichever they choose, consumers will pay more for food.
And in the capitals of the world’s largest economies, policymakers are recalibrating forecasts, bracing for the possibility that a war no one wanted may yet do what a pandemic and a European land war could not: tip the global economy back into crisis.
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