War with Iran Disrupts Global Economy

Conflict drives up energy and food prices, threatens shortages, and complicates central bank policies

Published on Mar. 10, 2026

Got story updates? Submit your updates here. ›

The ongoing war between the U.S. and Iran is causing significant damage to the global economy. The conflict has disrupted oil shipments through the Strait of Hormuz, driving up energy and fertilizer prices worldwide. This is threatening food shortages in poorer countries, destabilizing fragile states like Pakistan, and complicating the decisions of central banks like the Federal Reserve as they try to balance inflation and economic growth.

Why it matters

The closure of the Strait of Hormuz, a critical global oil shipping route, has removed a significant amount of oil supply from the market, causing prices to surge. This has far-reaching impacts, from higher gasoline prices for consumers to potential food shortages in developing nations that rely on imported fertilizers. The crisis also puts central banks in a difficult position, as they must decide whether to raise interest rates to combat inflation or cut them to support economic growth.

The details

After the U.S. and Israel launched missile strikes that killed Iranian leader Ayatollah Ali Khamenei on February 28th, Iran shut down the Strait of Hormuz, through which 20% of the world's oil supply passes. This has caused oil prices to spike from less than $70 per barrel to nearly $120, driving up gasoline prices in the U.S. and globally. The disruption to oil and fertilizer shipments also threatens food shortages, especially in poorer countries. Economists warn that if the conflict drags on, the global economy may struggle to absorb the shock.

  • On February 28th, the U.S. and Israel launched missile strikes that killed Iranian leader Ayatollah Ali Khamenei.
  • Shortly after, Iran shut down the Strait of Hormuz, a critical global oil shipping route.

The players

Ayatollah Ali Khamenei

The former leader of Iran who was killed in the missile strikes on February 28th.

Mojtaba Khamanei

The son of the slain Ayatollah Ali Khamenei, who is believed to be an even more hardline leader than his father.

Donald Trump

The former U.S. President whose actions and policies are seen as contributing to the current crisis with Iran.

Got photos? Submit your photos here. ›

What they’re saying

“For a long time, the nightmare scenario that deterred the U.S. from even thinking about an attack on Iran and which got them to urge restraint on Israel was that the Iranians would close the Strait of Hormuz. Now we're in the nightmare scenario.”

— Maurice Obstfeld, Senior Fellow, Peterson Institute for International Economics; Former Chief Economist, International Monetary Fund (wbal.com)

“The Strait of Hormuz has to be reopened. It's 20 million barrels of oil a day going through there. There's no excess capacity anywhere in the world that can fill that gap.”

— Simon Johnson, Economist, Massachusetts Institute of Technology; Former IMF Chief Economist (wbal.com)

What’s next

The judge in the case will decide on Tuesday whether or not to allow Walker Reed Quinn out on bail.

The takeaway

This crisis highlights the fragility of the global economy and the outsized impact that geopolitical conflicts can have on energy, food, and financial markets. Central banks and policymakers will be challenged to navigate the complex tradeoffs between controlling inflation and supporting economic growth in the face of these shocks.