A prolonged U.S.-Iran conflict can affect the global economy through three tightly connected channels: energy supply, transportation and food production. The most important pressure point is the Strait of Hormuz, through which an average of 20.9 million barrels of petroleum and other liquids passed each day in the first half of 2025—about one-fifth of global petroleum-liquids consumption. When traffic through the strait is disrupted, the consequences extend beyond oil: tanker rates and insurance costs rise, alternative shipping routes become more expensive, fertilizer supplies tighten and eventually higher production and transport costs can reach food prices.
The effects are not automatic or identical everywhere. Oil prices can rise sharply on expectations of shortages even before physical supplies are exhausted, while food prices usually respond more slowly because farmers, traders and governments can draw on inventories and alternative supplies. The greatest risk comes from a prolonged disruption that simultaneously reduces energy availability, raises freight costs and restricts fertilizer supplies. The World Bank and FAO have warned that these overlapping shocks are particularly significant for low-income and food-importing economies.
Why the Strait of Hormuz is the critical pressure point
The Strait of Hormuz is a narrow waterway between Iran and Oman connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea.
Its importance comes from the sheer amount of energy moving through it.
The U.S. Energy Information Administration estimates that 20.9 million barrels per day of petroleum and other liquids passed through Hormuz during the first half of 2025. That represented approximately 20% of global petroleum-liquids consumption and about one-quarter of globally traded oil transported by sea.
The strait also carried about 11.4 billion cubic feet per day of liquefied natural gas, more than 20% of global LNG trade, primarily from Qatar. Consequently, a disruption can affect both oil and gas markets.
This is why the economic consequences of a U.S.-Iran conflict can be global even though the fighting is geographically concentrated in the Middle East.
The current conflict shows how quickly the oil market can react
The market has already demonstrated the mechanism.
The EIA reported that Brent crude reached $118 a barrel on April 29, 2026, before falling to $72 by June 26 as expectations of renewed shipping through Hormuz improved. The agency attributed much of the volatility to disruptions in crude flows, production shut-ins and uncertainty over when normal tanker traffic would resume.
By September, renewed attacks had pushed prices back above $100. Reuters reported that Brent settled around 1% higher on September 14 as attacks on Saudi energy infrastructure and commercial vessels increased concerns about supply.
That pattern illustrates an important point: oil prices respond to expected future supply, not simply to barrels already lost.
If traders believe a disruption will last weeks or months, they can bid up crude futures immediately.
If diplomatic developments suggest shipping will resume, prices can fall rapidly even while the conflict itself continues.
What happens to oil prices?
There are several stages to an oil-price shock.
1. The risk premium appears
The first response is often financial rather than physical.
Traders anticipate that future supplies may be interrupted and demand compensation for that risk. This pushes crude prices higher.
That can happen before production actually falls substantially.
2. Physical supply begins to tighten
If tankers cannot safely leave Gulf ports, producers may eventually have to reduce or shut in production because storage capacity is limited.
The EIA reported that Middle Eastern production had already been shut in during 2026 as export routes became constrained.
3. Inventories absorb some of the shock
Commercial inventories and strategic reserves can provide a buffer.
But inventories are finite. If supplies remain below consumption for long enough, stockpiles fall.
The EIA estimated that global oil inventories declined by an average of 3.9 million barrels per day in the second quarter of 2026 and projected further inventory declines in the third and fourth quarters.
4. Alternative producers become more valuable
Higher prices encourage producers outside the conflict zone to increase output where spare capacity exists.
They also encourage consumers to reduce consumption.
But these adjustments take time.
That is why a prolonged disruption can have a much larger economic effect than a short-lived shipping interruption.
Alternative pipelines can help—but they cannot replace Hormuz
There are ways to move some Gulf oil without using the strait.
Saudi Arabia and the United Arab Emirates have pipelines capable of bypassing Hormuz. The EIA estimates their combined capacity at about 4.7 million barrels per day.
That is significant, but it is much smaller than the 20.9 million barrels per day that passed through Hormuz in the first half of 2025.
This creates an important structural limitation:
| Market channel | What a prolonged disruption could do | How quickly the effect can reach consumers |
|---|---|---|
| Oil | Reduce available crude and raise global benchmarks | Days to weeks |
| Shipping | Raise tanker rates, insurance and voyage times | Immediate |
| Natural gas/LNG | Tighten supplies and increase energy costs | Days to weeks |
| Fertilizer | Reduce availability and increase production costs | Weeks to months |
| Food | Increase transport and farm-input costs; potentially reduce future yields | Weeks to several growing seasons |
| Household inflation | Pass higher energy, transport and food costs into consumer prices | Weeks to months |
The table shows why the economic shock does not arrive everywhere at the same speed.
Oil and shipping markets can react almost immediately. Agricultural production takes longer to respond.
Shipping is the second major transmission channel
A conflict around Hormuz affects shipping in two ways.
The first is obvious: ships may be unable or unwilling to pass through the danger zone.
The second is less obvious: even ships that are still sailing become more expensive to operate.
War-risk insurance can increase. Tankers may wait offshore. Crews may demand additional compensation. Companies may reroute vessels.
In March 2026, the EIA reported that Middle East-to-Asia very large crude carrier rates reached their highest level since the agency’s data began in 2005. The agency attributed the increase to physical risks to vessels, higher war-risk insurance costs and a shortage of available tankers caused by vessels becoming trapped or delayed in the Persian Gulf.
This creates an important feedback loop.
Less shipping capacity → higher freight costs → more expensive commodities → higher prices for consumers.
And the effect is not limited to oil tankers.
Longer shipping routes can make ordinary goods more expensive
When a vessel cannot use a normal route, it may have to travel much farther.
The EIA notes that alternative routes around major maritime chokepoints can add thousands of miles and substantially increase transit times and costs.
A longer voyage means:
- More fuel consumption
- More crew time
- Greater exposure to insurance costs
- Fewer trips per ship each year
- Higher financing and inventory costs
- Greater uncertainty for importers
For low-margin commodities, those additional costs can be economically significant.
A container carrying manufactured goods can therefore become more expensive even if the underlying product has not changed at all.
The food shock works differently from the oil shock
Food prices do not necessarily jump by the same percentage as crude.
Food markets have several buffers that oil markets lack, including inventories, seasonal production, substitution between suppliers and government stockpiles.
But food is highly dependent on energy.
Farmers need fuel for tractors and irrigation. Food processors require electricity and other energy inputs. Trucks, ships and refrigerated warehouses require fuel. And fertilizer production—particularly nitrogen fertilizer—depends heavily on natural gas.
This creates several routes from war to food prices.
Fuel costs
Higher diesel prices increase the cost of planting, harvesting and transporting agricultural products.
Fertilizer costs
This may be the more important long-term channel.
The World Bank reported that fertilizer prices were projected to rise by more than 30% in 2026, with urea prices expected to increase sharply.
FAO has warned that fertilizer shortages caused by disruptions around Hormuz could reduce yields and tighten food supplies later in 2026 and into 2027.
That creates a crucial distinction between this year’s food-price shock and next year’s agricultural supply risk.
Higher fuel prices can affect food transportation almost immediately. Fertilizer shortages can affect crop yields months later.
Why fertilizer may become the hidden food-price problem
The Middle East is important not only because it produces oil and gas but because it supplies agricultural inputs.
The World Bank has estimated that Gulf economies supplied about 20% of global exports of urea and diammonium phosphate before the conflict.
If fertilizer cannot move through regional shipping routes or production facilities cannot obtain the energy they need, global supplies tighten.
Farmers then face a difficult choice.
They can:
- Pay much more for fertilizer
- Apply less fertilizer
- Switch crops
- Reduce planted acreage
- Absorb lower margins
Using less fertilizer can protect a farmer’s immediate cash flow but potentially reduce yields.
That is why a conflict that initially looks like an oil-market crisis can eventually become an agricultural-supply problem.
Food prices may rise unevenly
There is no single “global food price.”
Different commodities respond differently.
Oilseeds and vegetable oils can be particularly sensitive to energy prices because some oils can be used as biofuel feedstocks. Higher crude prices can increase incentives to divert agricultural commodities toward energy production, reducing the amount available for food.
Grains may respond more slowly if global stocks are comfortable.
Fresh produce can be especially sensitive to transport and refrigeration costs.
Fertilizer-intensive crops may face greater longer-term pressure if input costs remain elevated.
The World Bank reported that global food prices had already risen to their highest level since January 2024 in April 2026, while oils and meals increased particularly sharply during the early months of the conflict.
At the same time, FAO’s June Food Outlook noted that global cereal production remained historically high, providing an important buffer against an immediate worldwide food shortage.
That is why higher food prices do not necessarily mean a global food shortage.
Developing economies face a particularly difficult combination
Countries that import most of their fuel and food can be hit from several directions simultaneously.
Imagine a country that imports:
- Most of its petroleum
- Much of its fertilizer
- A significant share of its staple foods
An oil shock raises the cost of fuel.
Higher freight rates increase the cost of imports.
Higher fertilizer prices raise domestic farming costs.
A weaker currency can make dollar-denominated imports even more expensive.
The government may then face pressure to subsidize fuel or food at precisely the moment when its import bill is rising.
The World Bank, IMF, IEA and WTO have warned that the conflict’s effects are highly uneven and particularly damaging for vulnerable countries through higher fuel and fertilizer prices, uncertainty and pressure on jobs and livelihoods.
FAO similarly identifies Africa, Asia and other import-dependent regions as particularly exposed to the combination of energy, fertilizer and food-market disruptions.
Why consumers may feel the effects before official inflation data show them
There can be a delay between a commodity shock and the final retail price.
A supermarket may still have products purchased before fuel prices rose.
A trucking company may have fuel contracts that temporarily protect it from spot-market increases.
A farmer may have purchased fertilizer months before planting.
A manufacturer may have fixed transportation rates under an existing contract.
Eventually, however, those contracts and inventories are renewed.
If the underlying shock persists, higher costs can work their way through the supply chain.
This is one reason temporary commodity spikes can be absorbed while prolonged disruptions are much more damaging.
The difference between a short conflict shock and a prolonged crisis
The duration of the disruption may matter more than the initial price increase.
A short disruption
If shipping resumes quickly:
- Oil prices can retreat
- Tanker rates can normalize
- Inventories can stabilize
- Fertilizer flows can recover
- Farmers may avoid major changes to planting decisions
- Food-price effects may remain relatively limited
The EIA’s September outlook assumes that alternative routes and workarounds will gradually restore Middle Eastern oil flows, although it expects elevated prices and continued volatility while inventories recover.
A prolonged disruption
If the conflict continues to restrict Hormuz:
- More production could be shut in
- Global inventories could fall further
- Oil prices could remain elevated
- Shipping capacity could tighten
- Fertilizer availability could deteriorate
- Farmers could reduce fertilizer application
- Crop yields could eventually suffer
- Food inflation could become more persistent
The World Bank has warned that a more prolonged conflict could push millions more people into acute food insecurity.
Why oil prices could eventually fall even if the conflict continues
A war does not mechanically produce permanently rising oil prices.
Higher prices change economic behavior.
Consumers drive less. Airlines adjust schedules. Manufacturers seek efficiencies. Producers outside the conflict zone increase output where possible. Traders draw on inventories. Shipping companies develop alternative routes.
The EIA currently expects Middle Eastern flows to gradually recover through the forecast period as producers use pipelines, overland routes and other workarounds. It projects Brent to average about $90 a barrel in the second half of 2026 and then decline as production and inventories recover, assuming its supply-recovery assumptions hold.
That is a forecast, not a certainty.
A new attack on export infrastructure, a longer interruption of Hormuz or a broader regional escalation could invalidate those assumptions.
The economic effects go beyond oil and food
Energy and food are the most visible commodities, but the shock can spread further.
Higher energy costs can raise:
- Manufacturing costs
- Aviation expenses
- Electricity prices in some markets
- Freight and logistics costs
- Construction costs
- Mining costs
- Chemical production costs
The World Bank’s April 2026 Commodity Markets Outlook projected overall commodity prices to rise 16% in 2026, driven in large part by energy and fertilizer costs.
This can create a second economic problem: inflation.
Central banks may respond to persistent energy-driven inflation by keeping interest rates higher for longer. That can slow borrowing, investment and economic growth.
The result can become a difficult combination of higher prices and weaker economic activity.
What consumers should expect
Consumers should not assume that every oil-price increase will translate immediately into an equivalent increase in supermarket prices.
The transmission is more complicated.
Fuel: often responds relatively quickly to crude prices, although taxes, refining margins and local currencies affect the final retail price.
Transport: can become more expensive as fuel, insurance and freight rates rise.
Food: usually responds more gradually because inventories and agricultural production provide buffers.
Fertilizer-dependent food: faces greater risk if the conflict lasts through planting and growing seasons.
Imported goods: can become more expensive when freight, fuel and currency costs rise together.
For households, the most important question is therefore not simply how high Brent crude goes on a particular day. It is whether elevated energy and transportation costs persist long enough to pass through several stages of the supply chain.
What could change the outlook
Several developments could materially alter the economic picture.
A reopening of Hormuz
This would remove one of the largest immediate constraints on global energy trade and could reduce the risk premium embedded in oil and freight prices.
Greater use of alternative export routes
Pipelines and overland routes can partially compensate for disrupted maritime traffic, although their capacity is limited.
Strategic stock releases
Governments can release petroleum reserves to cushion temporary supply disruptions.
Increased production outside the Gulf
Additional production can eventually replace some lost supply, but spare capacity and infrastructure limit how quickly this can happen.
Continued disruption into the agricultural cycle
This is the scenario with the greatest potential to turn a temporary energy shock into a longer food-supply problem, because fertilizer availability affects future harvests rather than just current transportation costs.
The most important variable is duration
The U.S.-Iran conflict illustrates why modern commodity markets cannot be analyzed one product at a time.
A disruption in Hormuz can begin with oil.
Oil affects shipping.
Shipping affects the cost of moving goods.
Energy and natural-gas disruptions affect fertilizer.
Fertilizer affects agricultural production.
Those costs eventually reach food markets and household budgets.
But the chain is not automatic, and it does not move at a uniform speed. Global inventories, alternative suppliers, pipeline capacity, strategic reserves, crop conditions and consumer demand can all absorb part of the shock.
The crucial dividing line is duration. A brief interruption in energy shipments can produce a sharp but reversible price spike. A prolonged disruption can deplete inventories, constrain fertilizer supplies and alter agricultural production decisions, making the consequences much more persistent.
For that reason, the most useful indicators to watch are not just the daily oil-price headline. They are the volume of traffic through the Strait of Hormuz, the condition of Gulf export infrastructure, global oil and fertilizer inventories, tanker rates, alternative supply routes and the length of the disruption. Those indicators will determine whether the conflict remains primarily an energy-market shock or develops into a broader global food and inflation problem.