From oil to food to markets: How a month of war on Iran has remade the world economy

The oil shock

Global oil prices have skyrocketed since the military conflict began in late February, mainly due to the near-closure of the Strait of Hormuz. About 20% of the world's oil supply and liquefied natural gas pass through the waterway off Iran's coast.

Other major oil hubs across the Middle East have also sustained damage, including the United Arab Emirates' Port of Fujairah, further driving up oil prices to over $100 a barrel. When the markets closed on Friday, Brent oil sat at $112.57, while West Texas Intermediate landed at $99.64.

For the average person, the fallout means two things: spending more money at the pump and surging energy bills. In America, the national average gas price reached $3.98 on Sunday, up from $2.98 in February.

Some countries are trying to cushion the price shock through rationing. That includes the Philippines, where officials implemented a temporary four-day workweek for federal workers and urged businesses to conserve energy. Pakistan also implemented a shortened workweek, closed schools for two weeks, and had public-sector employees work from home to ration oil.

This month, the International Energy Agency released 400 million barrels of oil from reserves to ease global economic volatility. The agency said this war is creating "the largest supply disruption in the history of the global oil market."

Financial markets begin to crack

Trump has a way with words and has used them strategically to influence markets. Stock traders appeared to wise up this week, however, as multiple exchanges entered correction territory.

Two major indexes — the Dow and the Nasdaq 100 — are now halfway to a bear market. The latter, composed mostly of American tech companies and already reeling from uncertainty over the impact of AI on software companies, slid into the realm of a correction at the close of trading on Friday.

The broader S&P 500, meanwhile, notched its fifth week of losses by the end of the day on Friday, coming in just shy of a correction after a January peak of almost 6,980.

BCA Research, an independent provider of global investment data, said that if losses continue at this pace, it would be a strong "motivator" for Trump to rethink his war strategy.

While it's been a dire few weeks for the markets, not everyone thinks the war, as it stands now, is enough to reverse optimism around the industrial renaissance driven by AI and the tax cuts from Trump's "One Big Beautiful Bill."

"The bottom line is that the Iran shock is not big enough to offset the strong tailwinds to the US economy," Torsten Sløk, the chief economist at Apollo Global Management, said Friday.

The spectre of stagflation

Inflation is bad. So is a recession. Stagflation is both at the same time.

Sløk spent much of 2025 warning about the possibility of stagflation — the dire confluence of rising inflation and sluggish economic growth — driven by Trump's on-again-off-again tariff policies. In January, Sløk changed his tune, turning optimistic that the economy had improved.

A month later, Trump bombed Iran, surprising the world and putting stagflation back on the table, driven this time by the potential for the rising cost of oil to trigger inflation. The last time stagflation took hold, in the 1970s, it was also driven by the price of oil. It devastated the US economy, lowered living standards, and triggered intense financial pressure on consumers.

Stagflation is often considered the worst-case scenario for the economy since it's difficult to resolve. The Federal Reserve would be restricted in its ability to cut rates to ease a recession, because it would risk stoking even more inflation.

Federal Reserve Chairman Jerome Powell waved off the threat of stagflation in a press conference earlier this month. Powell said the current economic climate was difficult, but didn't think it was comparable to the 1970s.

Economist Paul Krugman, however, isn't so sure.

Air travel chaos

The airline industry felt the war's reverberations immediately.

Airspace closures in the region forced airlines to reroute or cancel flights, leaving tourists marooned. Dubai International has gradually resumed operations for some flights, but many airports have either limited operations or suspended flights.

Many US embassies in the Middle East are also closed, leaving large swaths of travelers stranded without a clear way home. One American visiting Dubai when the war broke out told Business Insider he felt "betrayed and left out to dry" by the government's lack of support.

Although the UAE said it would bear "all hosting and accommodation costs for affected and stranded passengers," some tourists have racked up thousands of dollars in additional costs while waiting to book a ticket home.

And now jet fuel prices are skyrocketing, making plane tickets more expensive. Jet fuel reached an average of $197 a barrel on March 20, according to the International Air Transport Association. The price was $99 at the end of February. Some airlines — like Qantas and Air India — are raising ticket prices and passing the costs on to consumers.

Supply chain disruptions come for AI and the price of food

The supply of oil gets most of the headlines. There are other commodities, however, that are also facing supply chain disruptions. And those commodities will affect everything from the AI revolution to food prices.

Sulfur, for instance, is a byproduct of oil and gas processing. It's wisely recycled to help extract metals like copper and lithium. Those metals are in high demand as AI companies race to build data centers to power their products. They are also used in the production of electric cars.

Sulfur is also key to producing urea, a widely used specialized fertilizer. A third of the global fertilizer supply also passes through the Strait of Hormuz. The prolonged disruption to the fertilizer supply will force farmers to ration its use, resulting in lower crop yields and, ultimately, higher grocery prices, hitting the average consumer where it hurts most.

The war on Iran is also affecting the supply of helium. Qatar supplies nearly one-third of the world's helium, a byproduct of liquid natural gas production that is critical for semiconductor manufacturing. That's another blow to AI, one of the key industries propping up the US economy.

It'll require a peace deal between the US, Israel, and Iran to resolve all these disruptions. For now, a deal remains elusive.