The United States-Israeli war on Iran and Tehran’s subsequent retaliatory strikes across the Gulf region have severely disrupted global financial and energy markets, sparking fears of a global recession. Since the start of US-Israeli strikes on 28 February, Iran has launched ballistic missiles at military bases and oil infrastructure, leading to a sharp spike in commodity prices, reports Al Jazeera.
Energy market volatility
Brent crude, the international industry benchmark, was priced at $106 per barrel on Monday morning, representing a rise of more than 40 per cent from $72 per barrel recorded on 27 February.
According to Muyu Xu, a senior crude oil analyst at Kpler, liquefied natural gas (LNG) prices have seen an even steeper increase of nearly 60 per cent.
On 2 March, QatarEnergy was forced to suspend LNG production following an Iranian drone attack, further straining a market where Qatar provides 20 per cent of the world’s supply.
The conflict has significantly reduced traffic through the Strait of Hormuz, a narrow channel responsible for the transit of approximately 20 per cent of global oil and gas. In 2024, about 84 per cent of crude oil and 83 per cent of LNG passing through the strait was bound for Asia, with China, India, Japan, and South Korea accounting for nearly 70 per cent of those shipments.
Ms Xu noted that Asian countries are now “scrambling to secure alternative supplies at higher prices” as Middle Eastern energy flows remain largely obstructed.
Impact on productivity and regional response
Rising energy costs have led to declining economic productivity across at least 85 countries. Cambodia has recorded a petrol price increase of nearly 68 per cent, followed by Vietnam at 50 per cent and Pakistan at 35 per cent.
In response, several governments have implemented drastic conservation measures. Pakistan and the Philippines have introduced four-day workweeks for government employees, while Thailand has mandated working from home for officials. Myanmar has restricted car usage to alternate days, and Sri Lanka has introduced a QR code system to regulate fuel purchases at pumps.
Financial market slump
Global stock markets have fallen by 5.5 per cent since the outbreak of the war, with Asian exchanges being the most heavily affected. The Tokyo Stock Exchange’s Nikkei 225 has dropped by 11 per cent, while the National Stock Exchange of India’s Nifty50 has fallen by 7 per cent.
London’s FTSE 100 has declined by 5.3 per cent, and the Saudi Exchange (Tadawul) has seen a 9.6 per cent decrease.
Frederic Schneider, a nonresident senior fellow at the Middle East Council on Global Affairs, stated that the sharper decline in Asian markets reflects their higher exposure to the energy crisis compared to the US.
Warnings of inflation and recession
International Monetary Fund (IMF) Managing Director Kristalina Georgieva warned on 9 March that a prolonged conflict poses a significant inflationary risk to the global economy. Economists at Capital Economics forecasted that if the conflict continues for three months, Brent crude prices could average $150 per barrel over the next six months.
Under a long-war scenario, GDP growth in the euro-zone is predicted to slow to 0.5 per cent year-on-year, while China’s growth could fall below 3 per cent. In the aviation sector, jet fuel prices have soared to between $150 and $200 per barrel, prompting carriers such as Air India, IndiGo, Qantas, and Air New Zealand to announce airfare hikes.
