Six Months of Conflict: Iran War’s Global Economic Shockwaves Continue

Six months after the commencement of hostilities, the war involving Iran has had a profound and uneven impact on global financial markets, energy supplies, and economies worldwide. While some sectors, particularly those related to artificial intelligence, have shown resilience, the conflict has exacerbated inflation, disrupted critical trade routes, and created significant economic strain for many nations.

The conflict, triggered by U.S. and Israeli strikes on Iran, has led to substantial volatility in energy markets. Brent crude oil prices surged significantly in the initial stages of the war, briefly exceeding $120 a barrel in April and averaging around $90 a barrel in 2026, a notable increase from approximately $70 in 2025. Disruptions to production in the Persian Gulf and reduced shipments through the Strait of Hormuz, a vital chokepoint for global oil and liquefied natural gas (LNG) trade, have been primary drivers of these price increases. The closure of the Strait of Hormuz, which handles a significant portion of global oil supplies, has particularly affected major importing nations such as China, India, Japan, and South Korea.

The International Energy Agency has described the situation as one of the most significant global energy security challenges. Beyond crude oil, refined fuel prices, including diesel and gasoline, have also climbed due to reduced refining capacity in the Middle East and Russia, and lost export flows from the Gulf. This has led to increased transportation, manufacturing, and household budget costs globally. Concerns remain about potential further disruptions as the northern hemisphere winter approaches, with risks to both Hormuz shipments and Russian energy infrastructure that could push up heating oil prices and inflationary pressures.

Global stock markets, however, have demonstrated a surprising resilience, largely cushioned by a robust rally in artificial intelligence-related stocks. The MSCI world equity index has reached record valuations, gaining significantly since the conflict began. This performance stands in contrast to the Gulf economies, some of which have faced a sharper deterioration. Bahrain, for instance, has seen its credit-default swap prices rise significantly, indicating increased financial risk.

The war has also complicated the traditional roles of safe-haven assets. U.S. Treasuries, typically a reliable store of value, have faced pressure due to inflation concerns and altered expectations for interest rate cuts. Gold has experienced unusual volatility, initially falling before rebounding as concerns about the long-term value of the U.S. dollar resurfaced. The U.S. dollar itself has seen a modest gain against a basket of major currencies, though this is partly attributed to weakness in other currencies.

Beyond energy and financial markets, disruptions to fertilizer shipments are raising concerns about a renewed wave of global food inflation. This issue is compounded by the effects of a strong El Niño and ongoing disruptions to grain shipments related to other conflicts. Global food prices have already risen to their highest levels in over three years, according to reports from July.

Iran’s own economy has suffered severe damage, with oil exports plummeting and economic sentiment reaching record lows. The nation’s Misery Index, calculated by adding inflation and unemployment rates, has hit historic highs. Job losses, particularly in the manufacturing sector, have been substantial. The blockade on the Strait of Hormuz has been a critical factor, significantly cutting off a key source of revenue for Iran and keeping its economy in a depressed state, contingent on concessions for recovery.

The economic consequences extend to increased government spending on subsidies and defense budgets worldwide, as nations seek to cushion citizens from energy impacts and bolster security. Global fossil fuel subsidies are projected to rise significantly. The conflict has also led to increased borrowing costs for governments, potentially limiting their capacity to absorb future shocks. The global economy, while resilient in some aspects, has become more expensive, less integrated, and more security-driven in the wake of the war.

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Global Affairs Desk

Global Affairs Desk at The Chenab Times covers international developments, global diplomacy, and foreign policy issues through fact-based reporting, explainers, and analytical pieces. The desk focuses on major geopolitical events, diplomatic engagements, and international trends, with an emphasis on verified information, multiple perspectives, and contextual understanding of global affairs.