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A man walks past a destroyed building following airstrikes in central Tehran, Iran, on March 4, 2026. – AFP\/Getty Images <\/p>\n A man walks past a destroyed building following airstrikes in central Tehran, Iran, on March 4, 2026. – AFP\/Getty Images <\/p>\n
The conflict raging in the Middle East will test the resilience of a global economy buffeted by tariffs and other trade disruptions over the past year.<\/p>\n
Barely a week into the latest turmoil in the region, there are already signs of strain along the carefully orchestrated arteries of global trade: from rice exports stuck at ports in India to spikes in the price of fertilizer critical to food production.<\/p>\n
A prolonged war that keeps energy prices high could drive up inflation and, with it, interest rates, piling pain on borrowers. Meanwhile, threats to cargo ships could snag supply chains, further raising prices for businesses and consumers.<\/p>\n
The widening conflict in the Middle East<\/a> could be \u201cvery impactful on the global economy across a range of metrics,\u201d such as inflation and economic growth, according to Dan Katz, deputy managing director at the International Monetary Fund.<\/p>\n The severity of the economic consequences will depend on how long it lasts.<\/p>\n Before the United States and Israel attacked Iran over the weekend, the IMF expected the global economy to grow by a healthy 3.3% this year.<\/p>\n The fund has not yet changed its outlook, saying it\u2019s \u201ctoo early\u201d to assess the economic impact. But it also said it was \u201cclosely monitoring developments\u201d and listed a number of risks to the global economy, including more trade disruptions, \u201csurges in energy prices\u201d a nd \u201cvolatility in financial markets.\u201d<\/p>\n The conflict\u2019s effect on the global economy largely hinges on energy prices, which soared this week on worries about supply. Brent crude, the global oil benchmark, is trading at levels not seen in more than 18 months.<\/p>\n The major risk here is a prolonged closure of the crucial Strait of Hormuz<\/a>, which is virtually the only way to ship the Middle East\u2019s copious oil and natural gas to the rest of the world. The narrow waterway, flanked by Iran on one side and Oman on the other, is ordinarily a conduit for around a fifth of daily global oil and liquefied natural gas production, according to the US Energy Information Administration.<\/p>\n With the strait virtually impassable, European benchmark natural gas futures have also skyrocketed and could more than double from levels seen before the war if shipments through the strait are halted for longer than two months, according to Goldman Sachs.<\/p>\n European prices are still well below the peaks hit in 2022, following Russia\u2019s full-scale invasion of Ukraine, but the region\u2019s stockpiles are much lower than in recent years and will need to be refilled before next winter at potentially much greater cost.<\/p>\n Consumer price inflation in the European Union \u2014 which stood at 2% in January \u2014 could rise by more than a percentage point if the conflict drags on for several months, according to Holger Schmieding, chief economist at Berenberg bank. And up to half a percentage point could be shaved off economic growth in that scenario, he told CNN.<\/p>\n Motorists are already paying higher prices at the pump. On Wednesday, Europe\u2019s largest automobile association, ADAC, said gasoline and diesel prices had jumped by double digits in Germany over the past week.<\/p>\n Gasoline prices have also climbed in the United Kingdom. In the United States, they are now at their highest level<\/a> in 11 months \u2014 and small businesses are feeling the squeeze<\/a>.<\/p>\n If oil prices stay at their current levels for several months, US consumer price inflation could rise from 2.4% in January to 3% by the end of the year, Goldman Sachs said<\/a>. That could make it even more difficult for the Federal Reserve to deliver interest rate cuts this year.<\/p>\n Asia, meanwhile, is even more vulnerable to a sustained energy price shock. About 80-90% of crude oil and liquefied natural gas shipped through the Strait of Hormuz is destined for the region, with China a major buyer, according to consultancy Capital Economics.<\/p>\n The war comes at a particularly difficult moment for China, which on Thursday set its lowest economic growth target<\/a> in decades.<\/p>\n \u201cMost economies in Asia are worse off and facing higher inflation as a result of the attacks on Iran,\u201d Capital Economics\u2019 Asia economists wrote in a note Tuesday, adding that inflation would rise by half a percentage point in most countries if Brent crude prices remain at current levels.<\/p>\n Alongside energy prices, Asian economies could be hit through another channel: exports.<\/p>\n India is already feeling the pain. More than 400,000 metric tons of basmati rice grown in the country for export are stuck at Indian ports or in transit, as the war disrupts shipping lanes across the Middle East, according to Satish Goel, president of the All India Rice Exporters\u2019 Association. Roughly 75% of India\u2019s annual basmati rice exports, or some 6 million tons, go to the Middle East, he told CNN.<\/p>\n Cars are parked at a filling station in Wasserbillig, Luxembourg, on March 4, 2026. – Harald Tittel\/picture-alliance\/dpa\/AP <\/p>\n
A cargo ship loaded with crude oil docks in Qingdao, China, on February 16, 2026. – Costfoto\/NurPhoto\/Getty Images <\/p>\n