War with Iran Sparks Global Economic Crisis

Conflict disrupts oil shipments through Strait of Hormuz, driving up energy and food prices worldwide

Published on Mar. 10, 2026

Got story updates? Submit your updates here. ›

The ongoing conflict between the U.S. and Iran has created a 'nightmare scenario' for the global economy, according to economists. The closure of the Strait of Hormuz, a key shipping route for oil, has driven up energy and fertilizer prices, threatening food shortages in poor countries, destabilizing fragile states, and complicating options for central banks trying to fight inflation.

Why it matters

The war with Iran is causing collateral damage to the world economy, with the disruption of oil shipments through the Strait of Hormuz having far-reaching consequences. Higher energy and food prices are squeezing households and businesses, while central banks face a dilemma in how to respond to the competing pressures of inflation and economic slowdown.

The details

The U.S. and Israel launched missile strikes on February 28 that killed Iranian leader Ayatollah Ali Khamenei, effectively shutting down the Strait of Hormuz, through which a fifth of the world's oil passes. This has caused oil prices to surge from less than $70 a barrel to nearly $120, taking gasoline prices with them. The disruption to fertilizer shipments is also threatening food supplies, especially in low-income countries. Economists warn that the world economy has limited capacity to make up for the loss of 20 million barrels of oil per day that normally flow through the Strait.

  • On February 28, the U.S. and Israel launched missile strikes that killed Iranian leader Ayatollah Ali Khamenei.
  • Oil prices have 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 U.S. president whose actions are seen as a key driver of the conflict with Iran.

Kristalina Georgieva

The managing director of the International Monetary Fund.

Simon Johnson

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

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 at the Peterson Institute for International Economics and former chief economist at the International Monetary Fund (Fortune)

“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 at the Massachusetts Institute of Technology and recipient of the 2024 Nobel memorial prize in economics (Fortune)

“Any countries with significant agriculture sectors, including the United States, would be vulnerable. The effects are going to be most devastating in low-income countries where agricultural productivity may already be challenged. Add this extra cost component and you get the prospect of significant food shortages.”

— Maurice Obstfeld, Senior fellow at the Peterson Institute for International Economics and former chief economist at the International Monetary Fund (Fortune)

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 and food supplies, with potentially devastating consequences for households and businesses around the world. Central banks and policymakers will be challenged to find the right balance between fighting inflation and supporting economic growth in the face of these shocks.