The escalating U.S.-Iran war is becoming a major shock to the global economy, with effects spreading far beyond the Middle East, The New York Times reports.
Markets are reacting first and most strongly through energy prices, since Iran’s position near the Strait of Hormuz makes it central to global oil and gas shipping. Even the threat of disruption has pushed oil prices higher and increased volatility in global markets.
A key focus is how higher energy costs are feeding into broader inflation worldwide. Transport, manufacturing and food production are all becoming more expensive as fuel and fertilizer prices rise. This is putting pressure on households and businesses, especially in countries that depend heavily on imported energy.
Central banks in advanced economies are becoming more cautious about cutting interest rates, and in some cases are tightening policy again to contain inflation. At the same time, organizations like the IMF and World Bank are lowering global growth forecasts because the conflict is expected to slow trade, reduce investment and weaken consumer demand.
Developing economies are described as particularly vulnerable. Many of them face a double burden such as higher import costs for fuel and food and limited financial capacity to cushion the shock through subsidies or borrowing.
Oil-exporting countries and energy companies can benefit from higher prices in the short term, while import-dependent regions, especially in Europe and parts of Asia, face weaker growth and more persistent inflation.
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