By Matija Šerić
Day by day over the past month, we have been witnessing the relentless war that the United States and the State of Israel are waging against the Islamic Republic of Iran. Like all wars, the current conflict brings devastating consequences for all involved countries. The local population endures daily fear, death, injuries, and displacement (with civilians suffering the most), while key infrastructure, the social fabric, and a rich cultural-historical heritage are being destroyed. However, the consequences of the war are not only felt in the Middle East but across the rest of the world.
The Iran War – an Economic Threat to the World
As time passes, the economic impact of the conflict becomes more tangible, or rather, the wallets of people in Asia, Europe, North and South America, and Africa are increasingly affected. The current war is an economic atomic bomb that could lead to massive challenges. Central banks, including the U.S. Federal Reserve, the Bank of England, and the European Central Bank (ECB), are already warning that the war is not only a security threat but also one of the most serious economic risks. Its consequences could further fuel inflation and stagflation, slow down or even eliminate global economic growth, and potentially trigger a recession, creating an environment in which balancing price stability and economic growth becomes an increasingly difficult task.
It seems that a repeat of the devastating energy crisis of the 1970s could occur, when Arab countries, in response to U.S. and allied support for Israel in the 1973 Yom Kippur War, drastically cut oil exports and pushed the world to the brink.
Closure of Hormuz and Record Low Oil Production
The closure of the strategically invaluable Strait of Hormuz at the beginning of March, attacks on tankers, U.S. strikes on Iranian energy facilities (refineries, pipelines, ports, LNG terminals, oil and gas fields and storage), and Iranian counterattacks on the energy infrastructure of Gulf countries have dealt a severe blow to the global economy.
More than 20% of global oil trade (around 20 million barrels per day) and 25–30% of global liquefied natural gas (LNG) trade (250–300 million cubic meters per day) pass through the Strait of Hormuz. Gulf Arab countries, Iran, and Iraq rely entirely on this passage for energy exports, while Saudi Arabia and the UAE have limited alternative routes.
Oil production in Kuwait, Iraq, Saudi Arabia, and the UAE combined fell by about 6.7 million barrels per day by March 10, and by at least 10 million barrels per day by March 12. This represents the largest supply disruption in the history of the global oil market. Therefore, the sharp rise in oil and gas prices comes as no surprise.
Soaring Energy Prices
Before the outbreak of the war on February 28, oil prices ranged between $66 and $72 per barrel. By the end of March, prices had risen to between $110 and $120. Gas prices in Europe have surged, effectively doubling in a short period, while fuel prices have increased by 20–30%. At the same time, uncertainty is increasingly affecting financial markets.
Consumers in Europe and around the world are feeling growing pressure and anxiously anticipating another wave of price increases that could affect everyday life—from utility bills to basic foodstuffs. Shortages of consumer goods, including highly sophisticated products, may also occur.
Rising Inflation and Possible Stagflation
One of the greatest global fears is a scenario in which the war significantly disrupts oil and gas production in the Middle East over a prolonged period. In such a case, high energy prices would not be a temporary shock but could persist for months or even years, gradually spreading to the prices of food, transport, and nearly all goods and services.
Energy is the foundation of modern economies, so increases in its price do not occur in isolation but multiply costs throughout the entire production and distribution system. This chain reaction would almost inevitably fuel a global wave of inflation while simultaneously slowing economic growth due to declining consumption and investment.
In such an unfavorable environment, the risk of stagflation grows—a combination of high inflation, unemployment, and low or stagnant growth—which presents a particularly difficult challenge for central banks and policymakers who must balance inflation control with economic stimulation.
Disrupted Air Traffic and Declining Tourism
Other problems are also accumulating daily. Many flights have been canceled (with passengers massively canceling tickets), and existing flights are disrupted, marking the biggest shock to air traffic since the pandemic.
Intercontinental routes between Europe and Asia, as well as routes to Gulf countries, are particularly affected, as airlines must bypass risky zones in the Middle East, increasing flight durations and costs. Airlines face rising fuel costs and operational uncertainty, while disruptions also impact cargo transport, slowing global supply chains and further driving up the prices of goods and services.
Tourism in the Middle East, as well as in parts of Asia (Turkey, Thailand) and North Africa (Morocco, Egypt), is among the most affected sectors.
Impact on Industry and Food Sector
European heavy industry—still not fully recovered from the energy shock of 2022 following Russia’s invasion of Ukraine—is once again under significant pressure. Industrial plants, such as those in Teesside in northeastern England, face reduced production or even closure, while Germany’s largest chemical company, BASF, is already raising prices.
At the same time, fertilizer prices are rising sharply, directly affecting farmers worldwide. This creates the conditions for another wave of food price increases, which could deepen the global inflation crisis and increase pressure on household budgets.
Food Crisis Could Be the Worst Since 2022
Regions heavily dependent on food imports, such as the Middle East and North Africa, are likely to be the most affected, where price increases and potential supply disruptions would have the fastest impact. Significant pressure could also be felt in sub-Saharan Africa and parts of South Asia due to dependence on imported fertilizers, energy, and grains.
Disrupted Global Supply Chains for High-Tech Products
The plastics, chemical, and pharmaceutical industries are also under strong pressure. Particularly concerning is the disruption in helium supply—a gas essential for semiconductor manufacturing and MRI machines—after Qatar temporarily halted production. Qatar accounts for roughly one-third of the global helium supply, which is a key byproduct of LNG production.
Experts warn that these disruptions could spill over into global production chains—from the automotive industry to electronics—further deepening existing instabilities in the world economy.
Negative Impact on the Real Estate Market
The conflict could also have indirect effects on global real estate investments. The closure of the Strait of Hormuz and increased geopolitical risk in the region could trigger “safe haven” capital flows. Analysts note that London traditionally attracts international capital during periods of uncertainty due to its developed financial system, strong property rights protection, and liquid real estate market.
Sharp Decline in Stock Markets
Global stock markets have recorded declines, with the Dow Jones falling by more than 400 points and the S&P 500 by 0.7%. History shows that global stock markets tend to recover relatively quickly after geopolitical conflicts, whether in the Middle East or elsewhere. However, that recovery has limits—key factors include oil prices.
If oil prices stabilize within a reasonable timeframe, markets can recover. However, in the case of prolonged high energy prices, pressure on inflation, interest rates, and consumption could significantly slow recovery.
Long-Term War and National Economic Crises
According to Barclays, in a scenario where the average oil price in 2026 reaches around $100 per barrel, global economic growth would be lower by 0.2 percentage points, reaching about 2.8%. At the same time, inflation would rise by 0.7 percentage points to around 3.8%.
If the war continues for months, oil prices could rise to around $170 per barrel, potentially leading to a global recession. Disruptions in global supply chains beyond the energy sector—from food to semiconductors—would become increasingly pronounced.
Conclusion
For this reason, the war must be stopped, as the greatest economic burden falls on the middle class, and especially on the poor, who are traditionally the most vulnerable. War benefits corporations and possibly some states, but it destroys ordinary people. Therefore, the question of ending the war is not only political but also economic—and above all, humanitarian.
