Global Economy Faces Strain as Iran War Intensifies
•March 10, 2026
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Why It Matters
Escalating energy prices threaten global inflation, slow growth, and could trigger fiscal stress, especially in emerging economies reliant on imported fuel and commodities.
Key Takeaways
- •Brent crude hit $120/barrel amid Iran conflict
- •Strait of Hormuz closure spikes LNG, fertilizer, jet fuel prices
- •Emerging markets face tighter financing due to energy shock
- •Governments consider strategic reserves releases and price caps
- •Global supply chain stress index at pandemic‑high levels
Pulse Analysis
The escalation of hostilities in Iran has sent shockwaves through the global energy market, pushing Brent crude to nearly $120 a barrel before a brief retreat below $100 following President Trump's remarks. The rapid price swing underscores the fragility of oil supply chains that depend on the Strait of Hormuz, a chokepoint handling roughly a fifth of worldwide petroleum exports. With the United States relatively insulated by domestic production, the price shock is being felt most acutely in Europe and emerging economies that rely on imported energy.
The disruption extends beyond crude, as the effective closure of the Hormuz corridor has lifted prices for liquefied natural gas, fertilizer, and jet fuel, reigniting fears of a new inflationary wave. Commodity‑driven cost pressures threaten to erode profit margins for manufacturers and raise input expenses for farmers, compounding existing challenges from AI‑related productivity shifts and rising sovereign debt. The World Bank’s Global Supply Chain Stress Index, already at pandemic‑era highs, now reflects tighter logistics, longer lead times, and heightened uncertainty across critical sectors.
Policymakers are scrambling to blunt the blow, weighing options such as releasing oil from strategic petroleum reserves, imposing temporary price caps, and extending subsidies to households and agribusinesses. While these measures can provide short‑term relief, they also risk fiscal strain and market distortions if not calibrated carefully. Emerging markets, which lack deep fiscal buffers, may see capital outflows and currency depreciation as investors price in higher energy risk premiums. The trajectory of the Iran conflict will therefore shape global growth forecasts, commodity cycles, and the pace of inflation for years to come.
Original Description
Jitania Kandhari, deputy CIO of solutions & multi-asset group at Morgan Stanley Investment Management, said that emerging markets are feeling the impact of the war in Iran and a chaotic oil market stronger than the United States. Kandhari said that some of this is due to the resource asymmetries between the US and China, as the US is more self-sufficient on energy, and the push and pull between east and west spheres of influence in the markets.
Policymakers around the world are readying measures to absorb surging energy and commodities prices triggered by the Middle East war that now threaten the global economy with its biggest shock since the pandemic.
What were cast as dire scenarios when the conflict began have quickly become reality, with Brent crude surging Monday to almost $120 a barrel from around $72 dollars before the war with Iran started.
While oil fell back below $100 after President Donald Trump indicated the war would be resolved “very soon” and said he plans to waive oil-related sanctions, it remains unclear how the conflict ends and how long it’ll take to unwind the energy supply problems. That’s injected fresh uncertainty into a global growth outlook facing a host of disruptors from AI and tariffs to rising debt.
Beyond oil, the effective closure of the Strait of Hormuz has led to a spike in prices for LNG, fertilizer, jet fuel and other key commodities, stoking fears of a new wave of global inflation, slower growth and supply snarls as factories are forced to slow production.
Before the US and Israel’s Feb. 28 attacks, the World Bank’s Global Supply Chain Stress Index was already hovering at its highest level since the pandemic.
After an initial wait-and-watch response, governments are now studying options that include releasing oil from strategic reserves, price caps to help households and subsidies and tax relief to cushion business and farmers.
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