The U.S.-Israeli military campaign against Iran, launched in late February, triggered what the International Energy Agency called the greatest global energy security challenge in history , a supply shock with a cascading economic toll that is still being measured.
The sequence of events moved faster than markets could price. U.S. and Israeli strikes began on February 28. Iran responded with ballistic missile attacks on Israeli targets, U.S. military installations, and Gulf oil infrastructure, then closed the Strait of Hormuz on March 4. That single chokepoint handles roughly 20% of the world's oil and gas supply. Within days, Brent crude surged from below $70 a barrel to above $100, peaking at $119 in March before pulling back to $88 when Iran announced the Strait would remain open during a ceasefire. Reuters reported that the March survey of economist forecasts pushed the full-year Brent average to $82.85 , 30% higher than the $63.85 projected just a month earlier. Goldman Sachs estimated that traders were demanding a $14 per barrel risk premium as of early March, simply to account for the possibility of further disruption.
The energy price shock was the visible part. Beneath it, a structural supply chain collapse unfolded across multiple sectors simultaneously. QatarEnergy declared force majeure on all exports after strikes hit Ras Laffan and Mesaieed, two of the world's most important LNG production sites. LNG prices rose nearly 60% from pre-conflict levels. A third of global fertilizer chemicals transit the Strait, and prices surged as that supply line severed. Capital Group's economists noted that Dubai and Doha serve as global nodes for capital flows, freight, and aviation , and both effectively went offline as a commercial hub as regional airspace closed. Emirates and Qatar Airways faced near-total cessation of operations.
The European Central Bank had been preparing to cut rates through 2026. Those plans froze. The ECB warned publicly that a prolonged conflict would likely trigger stagflation and push Germany and Italy into technical recession by year-end. Chemical and steel manufacturers across the EU imposed surcharges of up to 30% on industrial feedstock to offset surging electricity costs, a pressure that Oxford Economics warned could produce permanent deindustrialisation in some exposed sectors. The World Economic Forum estimated the Brent surge alone , which peaked at $120 , was sufficient to materially erode consumer spending across every major import-dependent economy.
The UK and German manufacturing sectors were among the hardest hit in Europe. Allianz's economic research noted that even a relatively short-lived escalation would produce a 2022-style inflation shock, with the duration of the conflict being the single most important variable in determining how much damage compounds. Oxford Economics modelled a scenario in which Brent averaged $140 for two months and found it broke meaningful parts of the global economy , reducing GDP growth, stalling investment, and accelerating capital reallocation away from energy-intensive industries.
The Gulf model under systemic pressure
For the Gulf Cooperation Council states, the economic impact went beyond energy prices. Wikipedia's economic impact entry , drawing on IMF and UN data , described the war as causing a systemic collapse of the GCC economic model. Iran struck desalination plants in Kuwait and Qatar, the source of 99% of drinking water in both countries, shifting the crisis from fiscal to humanitarian. Saudi Arabia and the UAE have limited pipeline alternatives to the Strait, but even those were under pressure as attack risk deterred shipping. The UNDP estimated that Arab nations could lose $120 to $194 billion in GDP growth depending on the conflict's duration.
The ceasefire announcement and Iran's commitment to keep the Strait open eased some of the acute pressure , Brent fell $10 in a single session on the news. But the structural damage does not reverse quickly. Supply chains that rerouted take months to normalise. Manufacturers that signed long-term surcharge contracts are locked in. Airlines that suspended routes face rebooking and fleet positioning costs that run into the hundreds of millions. For businesses evaluating supply chain resilience in 2026, the Iran conflict has made one thing clear: the assumption of frictionless global logistics, sustained since the end of the Cold War, is no longer safe to make.
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