Ricardo Pascoe Pierce
The escalation of war triggered by the US and Israeli attacks on Iran in late February 2026 has plunged the global economy into a scenario of high uncertainty. What began as a one-off military operation threatens to become a broad-spectrum conflict, whose economic consequences could be more profound and prolonged than those of any recent crisis.
The consensus among analysts and multilateral organizations is clear: the impact is being channeled through a vital artery for global trade, the Strait of Hormuz, creating a perfect storm of inflation, slowing growth, and reconfiguring trade alliances. At the heart of the problem is the energy crisis. Iran is not only a major producer, accounting for about 5% of global oil production, but its geographical position also gives it enormous power over global supply. The Strait of Hormuz, through which approximately 20% of the world’s oil consumption and a fifth of liquefied natural gas (LNG) transits, has become the epicenter of the storm.
Hostilities have caused an almost total paralysis of traffic on this critical route. Fear of drone attacks and naval mines has led insurers to withdraw their coverage for ships attempting to cross it. The most immediate impact has been on prices. Brent crude has climbed above $92.69 per barrel, incorporating a geopolitical risk premium of between $10 and $15. However, predictive models paint much bleaker scenarios. If the conflict persists and the Strait of Hormuz remains closed, the market consensus points to a barrel price above $100.
In a scenario of severe and prolonged disruption—such as the feared closure of the Strait for weeks—some projections do not rule out a jump to $150, which would constitute a shock comparable to the oil crisis. The natural gas market is not far behind. The declaration of “force majeure” by QatarEnergy, the world’s largest LNG exporter, has caused extreme volatility. Benchmark prices in Asia and Europe have skyrocketed, rising by nearly 80%.
This surge in energy prices injects a lethal dose of stagflation into the global economy by raising production and transportation costs, pushing up overall inflation. Oil prices sustained at $100 could shave up to 0.4 percentage points off global GDP growth and add about 0.7 points to average inflation. Before the conflict, the market expected a cycle of monetary easing by the Federal Reserve and the European Central Bank. Now, that expectation is fading. If the forecasts are confirmed, central banks will not hesitate to tighten their policy, even at the cost of slowing economic activity. The consequence will be more expensive credit and further stifling of investment.
The impact will not be uniform, and the conflict is set to create a new geography of winners and losers on the economic chessboard. The losers will be the economies of Europe and Asia, which are highly dependent on energy imports. Emerging countries with fiscal deficits and low foreign exchange reserves also face an acute risk of capital flight and currency depreciation. India, which depends on the Gulf for more than 60% of its crude oil, has already seen its refineries declare “force majeure” due to the inability to fulfill export contracts.
One beneficiary will be Russia. With Iranian oil off the market and Gulf routes blocked, the need for Russian crude has been reactivated. This led the US to temporarily ease its sanctions on Russia to allow Indian purchases, a major geopolitical shift. Other exporters, such as Canada and Norway, and US shale producers themselves, are seeing the profitability of their operations skyrocket. However, in the case of the US, the macro benefit is offset by the impact of high gasoline prices on consumers’ pockets. Similarly, Mexico is facing higher revenues from oil sales abroad, but higher costs from importing it and maintaining the IEPS tax on gasoline.
A worrying side effect is the impact on food production from rising fertilizer costs. Approximately 44% of sulfur, 31% of urea, and 18% of ammonia worldwide pass through the Strait of Hormuz. A sustained disruption of these substances would make agricultural inputs more expensive, reducing crop productivity and raising food prices, an inflationary pressure that would hit the poorest populations on the planet hardest.
The war in Iran has a domino effect, igniting inflation, paralyzing growth, and disrupting supply chains. The duration of the conflict will be the key variable. While a quick ceasefire could limit the damage, a prolonged confrontation—measured in weeks or months—could push the global economy into a severe recession.
@rpascoep
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