War with Iran Disrupts Global Economy

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

Published on Mar. 10, 2026

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The war with Iran is causing significant damage to the global economy, with the closure of the Strait of Hormuz leading to a surge in oil prices, higher inflation, and potential food shortages in poorer countries. The crisis is putting 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.

Why it matters

The Strait of Hormuz is a critical global shipping route, with around 20 million barrels of oil passing through it daily. Its closure has disrupted energy supplies and driven up prices, which will have far-reaching consequences for the world economy. This crisis comes on the heels of other recent shocks, such as the Russian invasion of Ukraine and the trade wars under President Trump, testing the resilience of the global economic system.

The details

The conflict has driven oil prices from less than $70 a barrel to nearly $120, leading to a sharp rise in gasoline prices. This is causing economic pain for energy-importing countries, especially in Asia and Europe, which are more dependent on Middle Eastern oil and gas. The disruption to fertilizer exports through the Strait of Hormuz is also threatening to push up food prices globally, with the potential for significant shortages in low-income countries.

  • On February 28, the U.S. and Israel launched missile strikes that killed Iranian leader Ayatollah Ali Khamenei, effectively shutting down the Strait of Hormuz.
  • Oil prices surged from less than $70 a barrel on February 27 to a peak of nearly $120 early on March 10.

The players

Ayatollah Ali Khamenei

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

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 President of the United States, whose actions are seen as a key driver of the conflict with Iran.

Kristalina Georgieva

The managing director of the International Monetary Fund, who has warned of the economic consequences of the conflict.

Simon Johnson

An economist at the Massachusetts Institute of Technology and a recipient of the 2024 Nobel memorial prize in economics.

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What they’re saying

“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 (newser.com)

“The world economy has shown itself capable of shaking off significant shocks like broad U.S. tariffs, so there is room for optimism that it will prove resilient to the fallout of the war on Iran.”

— Eswar Prasad, Professor of Trade Policy (newser.com)

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

— Simon Johnson, Economist (newser.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 need for policymakers to be proactive in addressing shocks and disruptions. It also raises questions about the role of geopolitics in economic decision-making and the importance of maintaining open trade routes and energy supplies.