Iran War Disrupts Global Energy Supply, Sparking Economic Turmoil

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

Published on Mar. 10, 2026

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The ongoing conflict between the U.S., Israel, and Iran has effectively shut down the Strait of Hormuz, a critical global shipping route through which 20 million barrels of oil pass daily. This has led to a surge in energy prices, with oil spiking from less than $70 per barrel to nearly $120, driving up gasoline prices and threatening food shortages in poorer countries that rely on fertilizer shipments through the strait. The crisis is complicating the options for central banks like the Federal Reserve, which must balance fighting inflation with supporting economic growth.

Why it matters

The disruption of oil and gas supplies through the Strait of Hormuz is a 'nightmare scenario' that is causing significant economic pain around the world. Energy-importing countries, especially in Europe and Asia, are being hit hard by the higher prices, while oil producers outside the conflict zone are benefiting. The crisis also threatens food security in developing nations that rely on fertilizer shipments through the strait. Central banks are facing a difficult policy dilemma as they try to address both high inflation and the risk of economic slowdown.

The details

The U.S. and Israel launched missile strikes on February 28th that killed Iranian leader Ayatollah Ali Khamenei, effectively shutting down the Strait of Hormuz. This key shipping route accounts for about 20% of the world's daily oil supply. With this critical artery closed, oil prices have surged from less than $70 per barrel to nearly $120, driving up gasoline prices in the U.S. and globally. The disruption in fertilizer shipments through the strait is also threatening food supplies, especially in poorer countries. Economists warn that if the conflict drags on, the economic fallout could be severe, with the IMF estimating that a 10% increase in oil prices could push up global inflation by 0.4 percentage points and reduce worldwide economic output by 0.2%.

  • On February 28, the U.S. and Israel launched missile strikes that killed Iranian leader Ayatollah Ali Khamenei.
  • Oil prices surged from less than $70 per barrel on February 27 to a peak of nearly $120 on March 9.

The players

Ayatollah Ali Khamenei

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

Mojtaba Khamenei

The son of the slain Ayatollah Ali Khamenei, who is believed to be an even more hardline successor as Iran's new supreme leader.

Donald Trump

The former U.S. president who is seen as a key driver of the conflict with Iran.

Kristalina Georgieva

The managing director of the International Monetary Fund who has warned about the economic impacts of the Iran conflict.

Simon Johnson

An economist at MIT and former IMF chief economist who has commented on the crisis.

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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

“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, MIT

“This is all about President Trump. It's not clear when he's going to declare victory.”

— Simon Johnson, Economist, MIT

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

The Iran conflict has delivered a major shock to the global economy, driving up energy and food prices and complicating the policy options for central banks. This 'nightmare scenario' of disrupted oil and gas supplies through the Strait of Hormuz threatens to inflict significant economic pain, especially on energy-importing countries, and could have far-reaching consequences if the crisis drags on.