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How is the Iran-US conflict affecting the global economy?

The war between the US and Iran is now in its eighth month, and its costs are showing up far from the Gulf: at petrol pumps, in gas storage tanks and in government budgets. This month brought a lower world growth forecast, oil at a five-month high and a rich-country fund to protect harvests.

Published 22 Oct 2026 Updated 23 Oct 2026 By Implica 18 sources 9 min read

THE SHORT ANSWER

Mainly through energy prices. The war has disrupted shipping through the Strait of Hormuz, the channel that carried about a fifth of the world's oil before the fighting, and Brent crude, the international benchmark, reached $114.72 a barrel on 23 October, against about $72 in February. The UN trade body UNCTAD has cut its 2026 world growth forecast to 2.6%, from 2.9% in 2025. Fuel subsidies are on track to top $1 trillion, European gas prices have roughly tripled this year, and the G7 has pledged $2.5 billion to help poor countries buy fertiliser.

What happened

October brought a run of economic reports. On 9 October, UNCTAD said world growth will slow to 2.6% in 2026 from 2.9% in 2025, and blamed the energy shock from the war. It still expects trade in goods and services to grow 4% at constant prices, after a record $35 trillion in 2025, and says fuel subsidies are on track to exceed $1 trillion this year. The same day, President Donald Trump said Russia would send more than 300,000 tons of diesel to world markets at once, another 500,000 in November and 1,000,000 after that. The Treasury issued a licence allowing Russian diesel imports until April 2027. By 16 October, our reporting says, no Russian diesel had yet reached the market.

On 15 October, G7 finance ministers, a group of leading industrial economies, met in Bangkok alongside the annual meetings of the International Monetary Fund and the World Bank. They pledged to mobilise $2.5 billion for food security, focused on fertiliser for vulnerable countries. The World Bank has identified 44 countries that may face food security problems. On 16 October Brent touched $110 for the first time since May. On 20 October the Dutch TTF contract, Europe's benchmark gas price, rose above 90 euros per megawatt-hour, its highest since December 2022.

On 22 October, Iranian state television said seven oil tankers had caught fire or hit mines in the Strait of Hormuz overnight, the most in a single day since the war began on 28 February. The Associated Press could not confirm the claim. Trump said Iran was making up attacks to push up oil prices before the US midterm elections on 3 November. Brent rose to $114.72, its highest since May. Stock markets also fell that day, led by sharp drops in AI-related shares, which analysts linked to the cost of borrowing to build data centres.

Why it matters

Energy feeds into transport, food and manufacturing, so a war around one shipping lane reaches ordinary prices everywhere. UNCTAD says governments are running out of room to shield consumers: borrowing costs are rising, fuel subsidies are heading past $1 trillion and the weather pattern El Niño is adding pressure on food prices. In the US, fuel prices have become a top issue ahead of the 3 November midterms, with regular gasoline averaging $4.32 a gallon on 16 October. That makes the oil price both an economic and a political number.

  • For drivers and businesses, fuel costs have climbed sharply. US diesel prices are up 70% since the war began, and US gasoline averaged $4.32 a gallon on 16 October.
  • For European households and industry, gas prices have roughly tripled since the start of the year, with storage low going into winter. Governments have so far avoided costly price caps and tax cuts because budgets are tight and borrowing is expensive.
  • For poorer countries and farmers, expensive energy raises fertiliser and fuel costs. The World Bank lists 44 countries that may face food security problems, and the G7 money is aimed at fertiliser access.
  • For governments and markets, subsidies are eating into public finances, and falling AI-linked shares show how fragile investor confidence is when borrowing is costly.

The background: a narrow sea lane that carries a fifth of the world's oil

A narrow channel with no easy bypass

The Strait of Hormuz lies between the Persian Gulf and the Gulf of Oman. Iran is on its north coast and Oman's Musandam Peninsula is on the south. It is the only sea passage from the Persian Gulf to the open ocean. By 2025, around 15 million barrels of oil a day moved through it, while onshore pipelines that avoid it can carry at most around 3 million barrels. All liquefied natural gas, or LNG, gas cooled into a liquid for shipping, has to go through by ship. During 2023 to 2025 the strait handled 20% of the world's LNG.

Iran had threatened to close it before. In December 2011 a vice president warned of cutting oil supply if sanctions limited Iranian exports. Oil rose 2% at first, but markets ultimately did not react significantly. Before 2026 the strait had not been closed for any extended time during Middle East conflicts.

Oil and sanctions, from 1951

Oil has been part of the Iran-US story since 1951, when Iran nationalised its oil industry and seized the assets of the Anglo-Iranian Oil Company. In 1953 the US and Britain orchestrated a coup against prime minister Mohammad Mosaddegh, fearing communist influence and economic instability after the nationalisation. The first US sanctions came in November 1979, after the seizure of the US embassy in Tehran. In April 1995 President Bill Clinton imposed a total oil and trade embargo on dealings by American companies.

In May 2018 Trump announced the US would leave the 2015 nuclear deal, known as the JCPOA, and sanctions were reinstated that November. On 28 August 2025 France, Germany and the United Kingdom started the snapback process to restore UN sanctions. Earlier rounds of sanctions had a clear effect on Iranian oil: the International Energy Agency estimated its exports fell to 860,000 barrels a day in September 2012, from 2.2 million at the end of 2011.

The war and the first oil shock

On 28 February 2026 the US and Israel launched large-scale strikes on Iran. Iran asserted control over the waterway not long afterwards, and the strait was closed. Crude had been trading around $72 a barrel. It reached $126 at the end of April.

In mid-June US and Iranian officials reached a preliminary ceasefire and sanctions framework. The material here does not say how it gave way, but by early August our reports described renewed strikes, Houthi attacks and a stalled deal to reopen Hormuz, with ship traffic near a standstill. Brent went past $85 on 10 August.

Autumn: $100 oil and a squeeze on diesel

Brent reached $94.65 on 1 September after US strikes on Iran and tanker attacks. It topped $100 on 9 September and was near $104 by 20 September. Refining margins on diesel, the gap between the fuel's price and the crude used to make it, reached $95 a barrel in September. Supply tightened because of the wars in Ukraine and Iran. Ukraine's defence ministry says its strikes have taken more than half of Russia's oil refining capacity offline.

Physical supply held up better than prices. Middle East oil exports returned to pre-war levels in September, at 16.5 million barrels a day, though 40% now bypass the strait. Experts told the Associated Press that producers have found ways to keep crude flowing, but at a mounting cost.

October: the bill arrives

Brent spent October bouncing in a range of about $97 to $112, on uncertainty over when the global energy industry can return to normal. The Russian diesel licence waived sanctions the US signed into law a month earlier. A bipartisan House bill, introduced on 16 October by Representative Gregory Meeks, would revoke those licences. Ukraine meanwhile abandoned an energy-site ceasefire announced by Trump and struck Russia's Ryazan refinery.

Gas prices in Europe rose through the month, and the UN cut its growth forecast. By the 22nd, Houthi attacks on Saudi Arabia had led Saudi Aramco, the state oil company, to tell staff to leave its Dhahran headquarters and work remotely, and the tanker reports pushed Brent to a five-month high.

GOOD TO KNOW

At the height of the 2022 energy crisis, after Russia invaded Ukraine, European gas prices spiked above 300 euros per megawatt-hour, more than three times today's level. Prices this week are the highest since December 2022.

Why does an oil and gas shock reach food?

Fertiliser prices follow natural gas, the main raw material for nitrogen fertiliser. When energy gets expensive, fertiliser does too, and poor farmers tend to cut it first. That can lower yields within a single planting season. The G7 pledge targets that link, rather than emergency food aid.

UNCTAD adds that El Niño is putting extra pressure on food prices. Persian Gulf shipping disruption may also push buyers toward suppliers outside the Gulf, which is our reading rather than a reported fact.

Why does Europe's gas storage matter this winter?

European countries fill underground storage in summer and draw it down in winter. EU storage is about 75% full, the lowest for the season in records going back to 2009. Germany, home to the region's largest storage sites, is just above 61% full, against about 75% a year ago. Last month Germany told the state-owned company SEFE Securing Energy for Europe to buy extra gas for storage, which helped support prices.

Forecasts put EU storage at 75% to 78% on 1 November, about ten percentage points below the five-year average. Even in normal weather, storage in north-west Europe could reach April with only 20%. A very cold winter could cut reserves to 10% to 15%. Analyst Moutaz Altaghlibi of ABN Amro sees no immediate threat of shortage, but says there is not enough of a safety margin to absorb new disruption.

Timeline: 1951 to today

OIL, SANCTIONS AND THE STRAIT

  1. Iran nationalises its oil industry, seizing the assets of the Anglo-Iranian Oil Company.

  2. The US and Britain orchestrate a coup against prime minister Mohammad Mosaddegh after the oil nationalisation.

  3. The first US sanctions on Iran follow the seizure of the US embassy in Tehran.

  4. Bill Clinton imposes a total oil and trade embargo on dealings with Iran by American companies.

  5. Trump announces the US will withdraw from the 2015 nuclear deal; sanctions are reinstated that November.

  6. France, Germany and the UK formally start the snapback process to restore UN sanctions on Iran.

WAR AND THE FIRST SHOCK

  1. The US and Israel launch large-scale strikes on Iran, and the Strait of Hormuz is closed, lifting crude from around $72 a barrel.

  2. Oil reaches $126 a barrel at the end of April.

  3. US and Iranian officials reach a preliminary ceasefire and sanctions framework.

PRICES CLIMB THROUGH SUMMER

  1. Oil heads for a 20% monthly surge as renewed strikes and Houthi attacks compound fears over Hormuz supply.

  2. Oil surges past $85 as a deal to reopen Hormuz stalls and ship traffic stays near a standstill.

  3. Brent hits $94.65 after US strikes on Iran and tanker attacks in Hormuz.

  4. Brent tops $100 as US-Iran strikes hit tankers.

  5. Oil steadies near $104 as Houthi strikes on Saudi oil sites keep supply risk priced in.

OCTOBER

  1. Brent surges past $102 as stalled talks and a new US carrier deployment revive fears of disruption.

  2. Middle East oil exports are reported back at pre-war levels in September, though 40% now bypass Hormuz.

  3. Oil surges past $104 on tanker attacks, Houthi strikes on Saudi Arabia and a quarter of US Gulf output shut by a hurricane.

  4. UNCTAD cuts its 2026 growth forecast to 2.6%, and Trump announces Russian diesel supplies under a Treasury licence.

  5. G7 finance ministers pledge $2.5 billion for food security, focused on fertiliser for vulnerable countries.

  6. Brent touches $110 for the first time since May as no Russian diesel has yet reached the market.

  7. The Dutch TTF gas benchmark tops 90 euros per megawatt-hour, the highest since December 2022.

  8. Iran says seven tankers were struck in Hormuz, and Brent rises to $114.72, a five-month high.

What to watch next

  • The US midterms on 3 November. Fuel prices are a top voter issue, and reports say the US is weighing renewed strikes on Iran after the election, which Iran says would bring attacks on Gulf oil facilities and undersea cables.
  • Russian diesel. Trump said 500,000 tons would follow in November, but the volumes depend on Russian refineries that Ukrainian strikes keep damaging, and the House bill from Representative Meeks would revoke the licences.
  • Europe's winter gas supply. Storage is forecast at 75% to 78% on 1 November, and LSEG analyst Yuriy Onyshkiv says price pressure could last until summer 2027.
  • Gulf operations. Aramco has told staff to leave its Dhahran headquarters after Houthi attacks, and the reports so far do not say whether other Gulf companies will do the same.

Sources

How this article was made: Implica's editorial system wrote it from the news reports above, with the background drawn from Wikipedia: Iran–United States relations, Strait of Hormuz, International sanctions against Iran.

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