War with Iran Deepens Global Economic Woes

Attacks on oil and gas infrastructure threaten long-term economic pain

Mar. 31, 2026 at 2:12am

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An abstract composition of overlapping triangles and rectangles in shades of gray, blue, and red, conveying a sense of disruption and instability without any literal depictions of energy infrastructure or war.Geometric abstraction illustrates the turbulent economic forces unleashed by the escalating conflict in the Middle East.Washington Today

The ongoing conflict between the U.S., Israel, and Iran has severely disrupted global energy markets, driving up prices for oil, natural gas, and other commodities. Strikes on refineries, pipelines, and export terminals in the Persian Gulf have wiped out a significant portion of the world's oil and gas supply, leading to fears of a prolonged global recession and a return to the 'stagflation' of the 1970s.

Why it matters

The war in the Middle East has delivered the 'largest supply disruption in the history of the global oil market,' according to the International Energy Agency. This has sent shockwaves through the global economy, with developing countries forced to ration fuel and subsidize energy costs to protect their poorest citizens. Experts warn that the long-term damage to critical energy infrastructure could prolong the economic pain for months or even years.

The details

Iran has hit Qatar's Ras Laffan natural gas terminal, which produces 20% of the world's liquefied natural gas. The March 18 strike wiped out 17% of Qatar's LNG export capacity and repairs will take up to five years. Iran also responded to U.S. and Israeli attacks on February 28 by effectively closing off the Strait of Hormuz, a transit point for a fifth of the world's oil, by threatening tankers trying to pass through. This led Gulf oil exporters like Kuwait and Iraq to cut production due to lack of access to the strait.

  • On February 28, Iran responded to U.S. and Israeli attacks by threatening tankers in the Strait of Hormuz.
  • On March 18, Iran struck Qatar's Ras Laffan natural gas terminal, wiping out 17% of the world's LNG export capacity.
  • Repairs to the Ras Laffan terminal are expected to take up to five years.

The players

United States

A key player in the conflict with Iran, carrying out attacks on Iranian infrastructure.

Israel

Conducting attacks on Iran alongside the U.S.

Iran

Retaliating against U.S. and Israeli strikes by targeting energy infrastructure in the Persian Gulf region.

Qatar

Home to the Ras Laffan natural gas terminal, which was struck by Iran, wiping out 17% of global LNG export capacity.

Kuwait

A Gulf oil exporter that cut production due to the disruption in the Strait of Hormuz.

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What they’re saying

“Historically, oil price shocks like this have led to global recessions.”

— Christopher Knittel, Energy economist, Massachusetts Institute of Technology

“You're raising the risk of higher inflation and lower growth.”

— Carmen Reinhart, Former World Bank chief economist, Harvard Kennedy School

What’s next

Experts warn that the long-term damage to critical energy infrastructure in the Persian Gulf could prolong the economic pain for months or even years, raising the specter of a global recession and a return to the 'stagflation' of the 1970s.

The takeaway

The war between the U.S., Israel, and Iran has delivered a devastating blow to the global economy, disrupting energy markets and threatening a prolonged period of high inflation and low growth. Policymakers will need to navigate this complex geopolitical and economic crisis carefully to mitigate the fallout and prevent a full-blown recession.