From oil to food to markets: How the month of war in Iran has revived the world economy

Global oil prices have risen since the military conflict began in late February, mainly due to the closure of the Strait of Hormuz. About 20% of the world’s supply of oil and liquefied natural gas passes through the waterway from the coast of Iran.

Other major oil hubs across the Middle East have also suffered damage, including the United Arab Emirates’ Port of Fujairah, which has pushed oil prices above $100 a barrel. When the markets closed on Friday, Brent oil was sitting at $112.57, while West Texas Intermediate reached $99.64.

For the average person, the recession means two things: spending more money at the pump and higher energy bills. In America, the average national gas price reached $3.98 on Sunday, up from $2.98 in February.

Some countries try to limit price movements by providing food. That includes the Philippines, where authorities implemented a four-day temporary shift for government workers and encouraged businesses to conserve energy. Pakistan has also implemented a shorter work week, closed schools for two weeks, and made government workers work from home to feed oil.

This month, the International Energy Agency released 400 million barrels of oil from reserves to ease the global economic downturn. The agency said the conflict is causing “the biggest disruption in the history of the world oil market.”

Trump has a way with words and has used them systematically to influence the markets. Stock traders seem to be smarting this week, however, as many discussions enter correction territory.

The two major indexes – the Dow and the Nasdaq 100 – are now in the middle of a bear market. The latter, made up mostly of American technology companies and already reeling from uncertainty over the impact of AI on software companies, entered a correction zone at the end of trading on Friday.

The broader S&P 500, meanwhile, notched its fifth straight week of losses by the end of the day on Friday, just shy of a correction after a January peak of around 6,980.

BCA Research, an independent provider of global financial data, said that if losses continue at this rate, it could be a strong “motivator” for Trump to rethink his war strategy.

Although it has been a critical few weeks for the markets, not everyone thinks that the war, as it stands now, is enough to restore confidence in the revival of the industry driven by AI and the tax cuts from Trump’s “One Big Beautiful Bill”.

“The bottom line is that the shock in Iran is not big enough to end the strong winds of the US economy,” Torsten Sløk, chief economist at Apollo Global Management, said Friday.

Inflation is bad. The same is true of recessions. Stagflation is both at the same time.

Sløk spent much of 2025 warning of the possibility of a recession – a negative combination of rising inflation and sluggish economic growth – triggered by Trump’s retaliatory policies. In January, Sløk changed his tune, hoping that the economy had improved.

A month later, Trump attacked Iran, shocking the world and putting stagflation back on the table, driven this time by the possibility of rising oil prices causing inflation. The last time stagflation took place, in the 1970s, it was also driven by the price of oil. It destroyed the American economy, lowered living standards, and caused severe financial stress on consumers.

Stagflation is often considered to be worst case scenario for the economy as it is difficult to solve. The Federal Reserve would be limited in its ability to cut rates to slow the recession, because it would risk further inflation.

Federal Reserve Chairman Jerome Powell waved off the threat of a recession at a press conference earlier this month. Powell said current economic conditions are tough, but he doesn’t think they can compare to the 1970s.

Economist Paul Krugman, however, is not so sure.

The airline industry felt the changes of the war immediately.

The closure of flights in the area has forced airlines to reschedule or cancel flights, leaving tourists stranded. Dubai International has slowly moved forward for some flights, but many airports have limited operations or canceled flights.

United States embassies in the Middle East have also been closed, leaving many stranded travelers with no clear way home. An American visiting Dubai when the war broke out told Business Insider he felt “betrayed and left out to dry” by the lack of government support.

Although the UAE said it would bear “all hosting and accommodation costs for affected and stranded passengers,” some tourists have racked up thousands of dollars in extra expenses while waiting to book a ticket home.

And now the price of jet fuel is rising, making plane tickets more expensive. Jet fuel averaged $197 a barrel on March 20, according to the International Air Transport Association. The price was $99 at the end of February. Some airlines – such as Qantas and Air India – are raising ticket prices and passing the cost on to customers.

The oil supply gets most of the headlines. There are other devices, however, that face supply disruptions. And those products will affect everything from the AI ​​revolution to food prices.

For example, sulfur is a product of oil and gas. It is also cleverly used to help extract metals such as copper and lithium. Those metals are in high demand as AI companies race to build data centers to power their products. They are also used in the manufacture of electric vehicles.

Sulfur is also key to producing urea, a widely used specialty fertilizer. A third of the world’s fertilizer supply also passes through the Strait of Hormuz. A long-term disruption in the supply of fertilizer will force farmers to scale back their use, resulting in lower crop yields and, ultimately, higher grocery prices reaching the common consumer where it hurts the most.

The Iran war also affects the helium supply. Qatar supplies about a third of the world’s helium, a byproduct of natural gas production that is important for semiconductor production. That’s another blow to AI, one of the key industries that power the US economy.

It will require a peace agreement between the US, Israel and Iran to resolve all these obstacles. For now, agreement remains elusive.