The US-Iran war is sending shockwaves through global trade networks, primarily due to Iran’s strategic location and role in energy markets. With Iran producing about 3% of the world’s oil and controlling access to the Strait of Hormuz—through which 20% of global oil supply passes—disruptions here could reshape international commerce.

Major impacts include:

– Oil Price Volatility: Brent crude has already risen by about 20% this year, trading around $73 per barrel, with projections of spikes to $100 if the conflict prolongs. This could add 0.6-0.7 percentage points to global inflation.

– Shipping Disruptions: Oil majors and traders have suspended shipments through the Strait of Hormuz due to attacks on tankers. Countries like Greece have advised vessels to avoid the route, leading to rerouting and higher freight costs.

– Supply Chain Fractures: Industries reliant on Middle Eastern energy, such as automotive manufacturing, face production halts and increased costs. The conflict has shattered hopes for normalized Red Sea shipping in 2026, weaponizing trade further.

– Market Instability: Global equities are expected to drop, with heightened volatility in cyclical sectors. A prolonged war could scramble oil shipments, affecting economies worldwide.

These disruptions extend beyond energy, influencing commodities, manufacturing, and logistics, potentially triggering a global economic downturn.