March 11, 2026

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Economic Shockwaves Reverberate Globally Amidst Fallout from War in Iran

(AP Photo/Tony Gutierrez)

As the war with Iran continues into its second week with no clear exit strategy in sight, the global economy remains significantly impacted as oil and gas prices increase exponentially. Iran continues to block passage through the Strait of Hormuz, where roughly 20 percent of the world’s oil supply flows through. Yesterday, U.S. intelligence assets began to see indications that Iran was preparing to deploy mines within the Strait of Hormuz, which would further complicate the situation and deter tanker traffic. According to Axios, this is the largest oil disruption in history, surpassing the Suez Crisis, which disrupted less than 10 percent of global oil supply. On Sunday night, U.S. President Donald Trump posted, “Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and World, Safety, and Peace.”

Beyond the effects that this crisis will have on the U.S. economy—particularly in the context of an already weakening job market and rising inflation—the rest of the world has also begun to feel the war’s impact. AP News reports that countries across South and East Asia have begun taking precautions to prepare for potential energy shortages. The Vietnamese government, for example, is encouraging citizens to work from home to conserve energy, and Indian restaurants warn customers of potential shutdowns due to the prioritization of supplying gas to households. Still, few countries will be as exposed as Pakistan, which imports roughly 40 percent of its energy and relies especially on Qatar and the United Arab Emirates for 99 percent of its liquefied natural gas (LNG) imports. The Pakistani Prime Minister, Shehbaz Sharif, announced a four-day workweek for government employees and a two-week school closure to attempt to prepare for the inevitable gas shortages. As already fragile states face economic crises, it risks further destabilizing these governments, which could have a cascading effect throughout the Global South.

These energy disruptions are also likely to affect global food production. According to commodity trading platform Kpler, roughly 33 percent of the world’s fertilizer supply passes through the Strait of Hormuz. Because this period coincides with the peak spring planting season in the Northern Hemisphere—when fertilizer demand is at its highest—there will be limited strategic stockpiles to fall back on. Christina Lu of Foreign Policy warns that prolonged disruptions could reduce crop yields in the United States. In turn, this could drive up food prices for consumers—already a politically sensitive issue in the United States, where it emerged as a major concern during the 2024 presidential election—and compound rising costs across other sectors. Globally, according to Bloomberg, Sudan, Somalia, Tanzania, Mozambique, Sri Lanka, Kenya, Australia, and New Zealand are other countries that will be hit hard by the fertilizer shortages.

Despite the wide range of disruptions caused by the conflict to global supply chains, a small number of countries—notably Norway, Canada, and Russia—stand to benefit, as major oil producers whose exports are not directly affected by the blockage of the Strait of Hormuz. Russia may hold the greatest relative advantage, given that its energy sector had already been under pressure from long-running U.S. and European sanctions imposed in response to the war in Ukraine, which significantly weakened access to what had previously been one of its largest gas export markets. António Costa, President of the European Council, remarked that not only does Russia benefit from increased profits from oil exports, but it also benefits from “reduced attention to the Ukrainian front as the conflict in the Middle East takes center stage.”

Indeed, the same day that Operation Epic Fury launched the U.S. into war with Iran, there were reports that Russia had accepted U.S. plans for security guarantees in Ukraine, which was the long-running foil to any diplomatic progress in peace negotiations between the two countries. Since then, however, no new reports have surfaced, and negotiations have seemingly stalled as the world’s focus is pulled to the Middle East.

Yet, even with the extensive ripple effects of Iran’s closure of the Strait of Hormuz, the United States still retains several policy and economic levers to mitigate these impacts. The most immediate of these is the release of strategic petroleum reserves (SPR). The SPR declined significantly during the Biden Administration, when 180 million barrels were released after global sanctions on Russian oil and gas, dropping the reserve to a 40-year low, according to Reuters. While it has been slowly replenished since then, the reserve holds only around 415 million barrels. CNBC reports that Rapidan Energy analysts believe the U.S. SPR is “finite and insufficient to fully offset” the supply losses from the closure of Hormuz. Washington can also coordinate with allies to jointly release the SPR. On Monday, the Financial Times reported that finance ministers from the G7 (Canada, France, Germany, Italy, Japan, the UK, and the US) held an emergency meeting to discuss just this. However, this would not solve the issue of LNG or fertilizer shortages.

The U.S. is also hypothetically able to escort commercial tankers through the strait, though this poses several risks. On March 3, Trump posted on Truth Social that he had ordered the “United States Development Finance Corporation (DFC) to provide, at a very reasonable price, political risk insurance and guarantees for the Financial Security of ALL Maritime Trade, especially Energy, traveling through the Gulf.” In the same post, Trump said that “if necessary,” the U.S. Navy would escort tankers through the Strait of Hormuz. However, any escort mission would likely face persistent threats from Iranian missiles and drones, and the security risks alone could make a single transit through the strait more costly than the profit margin on the oil shipment itself. As mentioned above, yesterday, U.S. intelligence reported that it had detected small Iranian crafts deploying naval mines in the Strait of Hormuz. Experts estimate that Iran’s naval mine stockpile sits anywhere from 2,000 to 6,000 mines, which would further complicate any naval plan to escort commercial tankers.

A third avenue for the U.S. and its partners lies in Kharg Island, a tiny piece of land just off the coast of Iran, situated about 300 miles from the Strait of Hormuz, and which processes 90 percent of Iran’s crude oil exports. According to Axios, members of the Trump Administration told reporters that seizing the island had been discussed internally last week. Trump had publicly mused about the U.S. taking the island to journalists at the Guardian in 1988, during the Iran-Iraq War. However, analysts at JP Morgan said that while a strike against the island would disrupt Iran's oil exports, causing long-lasting economic damage, it would also likely trigger “severe retaliation in the Strait of Hormuz.”