Washington– The attacks on Iran by the United States and Israel have pushed prices up, cast doubt on the outlook for the global economy, pushed global stock markets into recession, and forced developing countries to ration fuel consumption and subsidize energy costs in order to protect their poorest.
continuous Strikes and counterattacks on Persian Gulf refineriesPipelines, gas fields and tanker terminals threaten to prolong the global economic pain for months, even years.
“A week or two ago, certainly, I would have said, ‘If the war stopped that day, the long-term consequences would be very minimal,’” says Christopher Kneitel, an energy economist at the Massachusetts Institute of Technology. “But what we are seeing is the actual destruction of infrastructure, which means the consequences of this war will be long-lasting.”
Iran bombed the Ras Laffan natural gas terminal in Qatar, which produces 20% of the world’s liquefied natural gas. State-owned Qatar Energy Company said the March 18 attack wiped out 17 percent of Qatar’s liquefied natural gas export capacity and that repairs would take up to five years.
The war caused an oil shock from the beginning. Iran responded to the US and Israeli attacks on February 28 by closing the Strait of Hormuz, a transit point for ships. A fifth of the world’s oilThis is done by threatening tankers trying to pass.
Gulf oil exporters, such as Kuwait and Iraq, reduced their production because there was nowhere for their oil to go without reaching the strait. The loss of twenty million barrels of oil per day was the cause of what the International Energy Agency calls “the largest supply disruption in the history of the global oil market.”
The price of a barrel of Brent crude rose by 3.4% on Friday to settle at $105.32. This was up from about $70 before the war began. The price of US crude rose by 5.5% to settle at $99.64 per barrel.
“Historically, oil price shocks like this have led to global recessions,” Kneitel said.
The war also brought back bad economic memories of the oil shocks of the 1970s: Stagflation.
“You’re increasing the risk of higher inflation and lower growth,” said Carmen Reinhart of the Harvard Kennedy School, a former chief economist at the World Bank.
Gita Gopinath, former chief economist at the International Monetary Fund, recently wrote that global economic growth, which before the war was expected to be 3.3% this year, would be 0.3 to 0.4 percentage points lower if oil prices average $85 a barrel in 2026.
The Persian Gulf accounts for a large share of exports Two main fertilizersOne third of urea and one quarter of ammonia. Producers in the region have an advantage: easy access to low-cost natural gas, the feedstock for nitrogen fertilisers.
Up to 40% of global exports of nitrogen fertilizer pass through the Strait of Hormuz.
Now that the crossing has been closed, urea prices have risen by 50% since the war and ammonia by 20%. Brazil, a large agricultural producer, is particularly vulnerable because it gets 85% of its fertilizer from imports, Kelly Shaw, a strategic commodities expert at Alpine Macro, wrote in a commentary. Egypt, a major fertilizer producer, needs natural gas to manufacture this material, and production falters when it cannot obtain enough of it.
Ultimately, higher fertilizer prices are likely to make food more expensive and less abundant, as farmers skimp on it and get lower yields. The pressure on food supplies will be most severe for families in poor countries.
There is also war Disruption of global supplies of heliumIt is a byproduct of natural gas and a major input into the manufacture of chips, missiles and medical imaging. Qatar produces helium at the Ros Laffan facility and supplies it with a third of the world’s helium.
The head of the International Energy Agency said: “No country will be immune to the effects of this crisis if it continues to move in this direction.” Fatih Birol said on March 23.
Lutz Kilian, director of the Center on Energy and Economics at the Federal Reserve Bank of Dallas, said poor countries will be hardest hit and face the greatest energy shortages “because they will be outbid when competing for remaining oil and natural gas.”
Asia is particularly vulnerable: More than 80% of the oil and liquefied natural gas that passes through the Strait of Hormuz is headed there.
In the Philippines, government offices are now only open four days a week, and bureaucrats must limit the use of air conditioners to no more than 75°F (24°C). In Thailand, public sector employees were asked to take stairs instead of elevators.
India is the world’s second largest importer of liquefied petroleum gas, which is used in cooking. The Indian government prioritizes families over businesses, allocating its limited supplies and absorbing most price increases to keep costs low for poor families.
But LPG shortages have forced some restaurants to shorten operating hours, temporarily close or drop dishes such as curries and fried snacks that require a lot of energy.
South Korea, which relies on energy imports, is restricting the use of cars by public employees and has reinstated fuel price caps that were dropped in the 1990s.
As for the United States, the largest economy in the world, it is somewhat isolated.
America is an oil exporter, so its energy companies will benefit from higher prices. LNG prices are lower in the United States than elsewhere because its export liquefaction facilities are already operating at 100% capacity. The United States cannot export any more LNG than it already has, so the gas stays at home, keeping domestic supplies plentiful and prices stable.
However, rising gasoline prices are weighing heavily on American consumers who are already frustrated by the high cost of living. According to AAA, the average price of a gallon of gasoline rose to Nearly $4 per gallon from $2.98 per month since.
“Nothing weighs on the collective psyche of consumers more than having to pay more at the gas station,” Mark Zandi, chief economist at Moody’s Analytics, and colleagues wrote in a commentary.
The US economy was already showing signs of weakness, expanding at an annual pace of just 0.7% in the October-December period, down from 4.4% in the July-September period. Employers unexpectedly cut 92,000 jobs in February, and added just 9,700 per month in 2025, the weakest employment rate outside of a recession since 2002.
Gregory Daco, chief economist at EY-Parthenon, has raised the odds of a US recession over the next year to 40%. The risk when times are “normal” is only 15%.
The global economy has proven resilient to repeated shocks: the pandemic, the Russian invasion of Ukraine, the resurgence of inflation, and the high interest rates needed to keep it under control.
So there was optimism that he could also ignore the damage from the Iran war. But these hopes are fading as threats to the energy infrastructure in the Gulf region continue.
“It will likely take years to repair some of the damage to Qatar’s LNG facilities,” said Killian of the Dallas Fed, who also pointed to necessary repairs to refineries in countries like Kuwait and tankers in the Gulf that must be refueled offshore. “The recovery process will be slow even under the best of circumstances.”
“There is no upside to the conflict with Iran,” Zandi and his colleagues wrote. “At this point, the questions are how long hostilities will last and how much economic damage they will cause.”