The attacks launched by the United States against the Islamic Republic of Iran, in cooperation with Israel, pose a threat to the global economy and push markets towards facing a new crisis amid growing concerns about the escalation and duration of confrontations. This is especially concerning as these attacks come nearly eight months after clashes between Israel and Iran, which culminated in the U.S. targeting Iranian nuclear facilities.

These fears are further heightened by the potential for these confrontations to escalate into an open-ended war, surpassing the timeline originally desired by those who ignited it. Such a scenario would place the global economic situation in jeopardy, leading to various possibilities. This could accelerate the slowdown of the global economy due to setbacks in several vital sectors, primarily energy, tourism, and aviation, as well as the anticipated rise in insurance and shipping costs.

**Economic Growth Under Threat**

Last year, the global economy managed to maintain a significant level of growth despite the global trade war instigated by former President Donald Trump through increased tariffs, in addition to his threats against the independence of the Federal Reserve and other practices. Despite these shocks, inflation continued to decline, and stock markets in Europe and other regions reached new record highs, according to specialized media reports.

However, this growth in the global economy may not withstand the developments caused by U.S. and Israeli attacks, which quickly transitioned into a regional conflict with Iran targeting Gulf countries and their vital installations. Ground indicators suggest that military confrontations are still in their early stages, making it too early to determine their medium and long-term outcomes.

**Strait of Hormuz, Oil, and Gas Prices**

Iran’s attempt to close the Strait of Hormuz could have direct negative implications for energy supplies, disrupt maritime navigation, and disrupt global supply chains, all of which threaten to slow down the global economy due to a lack of production inputs. This would lead to a decrease in goods production rates, accompanied by a rise in their prices, pushing inflation rates to higher levels.

Closing the Strait of Hormuz to maritime traffic would have immediate consequences for oil and gas-producing countries bordering the Gulf, especially those without alternative export routes except through this vital maritime corridor. Iraq, Qatar, and Kuwait are among the most economically vulnerable producers due to their near-total dependence on the strait for exporting their oil and gas, which constitute a primary source of their public revenues.

Ironically, Iran, which is attempting to close the strait as a geopolitical pressure tactic, would also be one of the most economically affected by this action, alongside its key trading partners, notably China, the largest importer of oil from the region and particularly from Iran.

Signs of rising oil and gas prices began to emerge the day after confrontations started, with oil prices reaching about $80 per barrel. This was expected as nearly one-fifth of global oil supplies pass through the Strait of Hormuz. Brent crude had increased by approximately 12% to around $73 per barrel last month due to heightened chances of conflict between the U.S. and Iran. Continued closure of the Strait of Hormuz threatens to create a significant shock in global oil prices, potentially driving them above $100 per barrel, according to experts.

Moreover, natural gas markets are not insulated from the repercussions of closing the Strait of Hormuz to maritime traffic and the military escalation targeting vital facilities. It is worth noting that Qatar’s announcement to halt liquefied natural gas production led to a 45% increase in gas prices in Europe. This could exacerbate inflationary pressures on global economies, especially in Europe, which relies on liquefied natural gas imports. It may also weaken industrial activity and elevate the likelihood of slowing growth or even entering a recession.

Conversely, oil prices are likely to rise in global markets once Iranian oil exports cease, provided that navigation through the Strait of Hormuz remains open to ships. Iran ranks seventh among oil-exporting countries, producing 1.66 million barrels per day by 2025, following Saudi Arabia, Russia, the United States, Iraq, the UAE, and Brazil, unless other producing countries ramp up their output to compensate for the halt.

**Global Growth and Inflation Risks**

Asian countries are the most vulnerable to the repercussions of maritime disruptions in the Strait of Hormuz, with China at the forefront due to its heavy dependence on energy imports from the Gulf region, particularly Iranian oil. According to 2024 data from the EIA, approximately 84% of crude oil and condensate exports, and about 83% of liquefied natural gas shipments that passed through the strait, were headed for Asian markets, with China, India, Japan, and South Korea leading the way.

It is important to note that instability in oil prices poses a direct obstacle to sustainable economic growth. Any new increase in oil prices by $10 per barrel during a given year can reduce growth rates by 10 to 20 basis points in the following year. Therefore, any sustained increase in oil prices would negatively impact the global economy.

**Conclusion**

Consequently, the ongoing U.S.-Israeli war on Iran and the obstruction of international shipping through the Strait of Hormuz represent not just a regional crisis but a global economic shock. The global economy is still heavily reliant on energy flows from the Gulf, and any disruption in this vital artery could directly affect global energy security on one hand and the global economy on the other.

It could also contribute to rising inflation rates internationally, disrupt financial markets, and increase the costs of maritime shipping and insurance, all of which could limit the pace of global economic growth and exacerbate uncertainty in the international economy. In an interconnected economic world, the cost of war on an economic level could far exceed the costs of the battlefield itself.