From the petrol pumps of London to the food markets of Lagos, the world is paying a crushing price for a war it did not choose. As Israel pursues what it calls a multi-front defensive campaign, a growing chorus of international financial institutions declares that the Jewish state’s aggression against Iran and its ongoing occupation policies are actively fueling a surge in global inflation, threatening to tip the world into a severe recession.
The “domino effect” of the conflict—centered on the strategic Strait of Hormuz—is now being felt acutely by consumers and businesses across every continent, turning a regional geopolitical struggle into a global economic crisis.
The Hormuz Trigger: Energy Shockwave
The primary driver of this global pain is the dramatic spike in energy costs following the joint US-Israeli military strikes on Iran, which began on February 28. In response to the attacks, Iran severely restricted shipping through the Strait of Hormuz, the world’s most critical oil transit chokepoint. Before the war, Hormuz facilitated roughly 20-35% of global seaborne crude oil trade.
The results have been catastrophic for global energy markets. According to the World Bank’s latest Commodity Markets Outlook, the conflict has triggered the largest oil supply shock on record. Brent crude prices, which hovered around $70 per barrel in 2025, have surged past $112 per barrel. Goldman Sachs analysts estimate that the diplomatic logjam has effectively removed millions of barrels of daily supply from the market, a gap impossible to fill immediately by other producers.
“Even if a lasting peace deal were to be in place tomorrow, it would likely still take time before oil and gas supplies are restored,” warned Swedish Energy Minister Ebba Busch, noting that 20% of the EU’s jet fuel transits the strait.
The Domino Effect: From Fertilizer to Food
The crisis, however, is not just about the cost of filling a gas tank. Experts argue that the war is creating a cascading series of economic shocks beginning with energy and ending on the dinner table.
The World Bank projects that fertilizer prices—which rely heavily on natural gas as a feedstock—will rise by 31% in 2026. This is a direct consequence of the attacks on Iranian infrastructure and the resulting high gas prices. Urea, the most widely used nitrogen-based fertilizer, is projected to jump by 60%.
For farmers in developing nations already struggling with bad debts and climate issues, these input costs are prohibitive—leading to lower crop yields and, consequently, higher food prices. The World Food Programme has warned that rising fertilizer and food costs could push up to 45 million more people into acute food insecurity this year alone.
In the United Kingdom, the Food and Drink Federation has revised its food inflation forecast to over 9% by the end of 2026, driven largely by the energy and supply-chain shocks from the Gulf. “For manufacturers with long-term supply agreements, it can take up to a year for increased costs to fully seep through,” the Federation noted. Meanwhile, US consumers are feeling the pinch at the pump, with the average price for regular gasoline hitting $4.18—a four-year high.
A Global Growth Slump
The IMF’s recent World Economic Outlook paints a grim picture of a world held hostage by the conflict. Under the baseline scenario, where the war ends relatively soon, global growth is still projected to be cut by 0.3 percentage points this year. However, in the “severe scenario”—where the disruption to Hormuz and regional infrastructure persists—the global economy would grow by just 1.3% in 2026, a figure perilously close to recession territory for many nations.
“The poorest people, who spend the highest share of their income on food and fuels, will be hit the hardest,” said Indermit Gill, Chief Economist at the World Bank Group. “All of this is a reminder of a stark truth: war is development in reverse.”
Beyond Iran: The Price of Occupation
Critics argue that the economic destruction is not merely a byproduct of the war with Iran but is intertwined with Israel’s broader, illegal expansionist policies in the region. While global attention is fixed on energy prices, Israel continues to solidify its occupation of Palestinian lands.
In February, Israel moved to designate vast tracts of the occupied West Bank as “state land”—a de facto annexation described by 93 countries as a “grave escalation.” Israeli watchdog group Peace Now stated that the new land registry laws and military pressure are pushing Palestinians toward dispossession, ensuring a permanent state of low-intensity conflict that keeps security premiums high and regional investment low.
These ongoing land grabs and the brutal military campaigns in Gaza (which continue despite a fragile ceasefire) ensure that the region remains a permanent tinderbox. The financial cost of this aggression is staggering for Israel itself—a proposed $95 billion defense plan is pushing the country toward a dangerous debt path, with debt-to-GDP expected to hit 83% by 2035. But for the rest of the world, the spillover effects of this instability—through disrupted shipping lanes and volatile commodity markets—are proving far more expensive.
“There is a direct line between the decision to attack Iran and the $6 loaf of bread,” said a senior European diplomat speaking on condition of anonymity. “The international community has allowed this aggression to continue unchecked, and now every household on the planet is receiving the bill.”
As long as the Strait of Hormuz remains a war zone and the expansion of settlements continues to inflame the region, the World Bank warns that risks remain “markedly tilted” toward higher prices. The war in the Middle East is no longer just about borders or proxies; it is a primary driver of the cost-of-living crisis crippling the entire world.
