The ongoing conflict involving Iran is sending economic shockwaves across global markets, pushing up energy and fertiliser prices and raising fears of food shortages in vulnerable countries. Economists warn that the disruption is also complicating efforts by central banks to control inflation.

At the center of the crisis is the Strait of Hormuz, a strategic shipping corridor through which roughly one-fifth of the world’s oil supply normally passes. The route has effectively been shut since military strikes by the United States and Israel against Iran began 11 days ago, triggering widespread concern in global energy markets.

Oil prices have surged sharply since the conflict escalated. Crude traded below $70 per barrel in February but climbed to nearly $120 earlier this week before easing to around $90. The rise in crude prices has pushed gasoline costs higher as well. According to the American Automobile Association, the average price of gasoline in the United States jumped to $3.48 per gallon from just under $3 only a week earlier.

Economists say the impact could be even greater in regions that rely heavily on Middle Eastern energy supplies. Countries in Europe and Asia depend more on imported oil and gas from the Gulf than the United States, making them particularly vulnerable to supply disruptions.

Kristalina Georgieva, managing director of the International Monetary Fund, warned that sustained increases in oil prices could have broader economic consequences. She said every 10 percent rise in oil prices that lasts most of the year could push global inflation up by 0.4 percent while reducing worldwide economic output by up to 0.2 percent.

Economists stress that reopening the Strait of Hormuz is essential to restoring stability. Simon Johnson of the Massachusetts Institute of Technology said about 20 million barrels of oil pass through the waterway each day. He noted that global producers have little spare capacity to replace that volume if shipments remain blocked.

Despite the shock, some analysts believe the global economy may still manage to absorb the disruption if the conflict proves short-lived. Eswar Prasad, a trade policy professor at Cornell University, said the world economy has previously shown resilience after major shocks such as the Russian invasion of Ukraine and sweeping tariff measures introduced in 2025.

The war is already creating uneven economic effects across countries. Major energy importers including Japan, India, China and several European economies face higher costs as oil prices climb. Oil producers outside the conflict zone such as Norway, Russia and Canada could benefit from higher export revenues.

Some nations face particularly severe challenges. Pakistan imports about 40 percent of its energy and relies heavily on liquefied natural gas shipments from Qatar, supplies that have been disrupted by the conflict.

The crisis is also affecting global agriculture. Researchers at the International Food Policy Research Institute estimate that up to 30 percent of the world’s fertiliser exports pass through the Strait of Hormuz. Disruptions to shipments of products such as urea, ammonia and phosphates are already pushing costs higher for farmers.

Experts warn that higher fertiliser prices may eventually translate into rising food costs worldwide. Low-income countries with fragile agricultural systems are expected to face the greatest risk of shortages if the disruption continues. Central banks are now confronting a difficult choice between raising interest rates to curb inflation or easing policy to support economic growth as the crisis unfolds.

Oil markets experienced a sharp retreat on Monday after US President Donald Trump suggested the conflict with Iran could be short-lived and indicated Washington may ease oil-related sanctions on certain countries to ease pressure on crude prices.

“So in some countries, we’re going to take those sanctions off until this straightens out,” Trump told reporters, without specifying which nations might be affected. The US currently maintains sanctions on Iran, Venezuela, Russia, Syria, and North Korea.

Trump also confirmed that he had spoken with Russian President Vladimir Putin to discuss the war and other international issues. Following his remarks, oil prices fell more than 9% from recent highs, with Brent crude trading just under $90 per barrel and West Texas Intermediate (WTI) at $85.40 during European morning trading. Prices had briefly surged to nearly $120 a barrel earlier, their highest level since 2022, amid concerns over the appointment of Mojtaba Khamenei as Iran’s new supreme leader.

Investors interpreted the leadership change as a signal that Tehran could adopt a hardline stance, fueling fears of prolonged disruptions to global oil supplies. Trump, however, described the US military intervention as a “short-term excursion” aimed at neutralizing threats in the region. He also warned that any action by Iran to block oil flow through the Strait of Hormuz would trigger a response from the United States “twenty times harder than they have been hit thus far.”

In response, Iran’s Revolutionary Guard said that the country would “determine when the war ends,” signaling the potential for continued volatility.

The easing in oil prices sparked a rally in global stock markets. European indices climbed sharply, with London’s FTSE 100 up 1.1%, Paris’ CAC 40 rising 1.9%, Frankfurt’s DAX gaining 2%, and Spain’s IBEX 35 and Italy’s FTSE MIB both up 2.5%. The broader Stoxx 600 index increased 1.7%. Asian markets also rebounded after losses on Monday, with Tokyo’s Nikkei 225 rising 2.9%, South Korea’s Kospi jumping 5.4%, and Australia’s S&P/ASX 200 up 1.1%. Hong Kong’s Hang Seng added 2.1%, while Shanghai’s Composite index rose 0.6%.

Neil Newman, head of strategy at Astris Advisory Japan, said the recovery reflected market relief following Trump’s comments. “Volatility is going to remain with us, but things are certainly looking a lot brighter today,” he said.

The Strait of Hormuz remains a focal point for global energy markets, as roughly a fifth of the world’s oil passes through the narrow waterway daily. Analysts warn that any prolonged closure could send oil prices soaring above $150 per barrel.

Bond yields and currencies reacted to the market shift. The 10-year US Treasury yield fell to 4.10% from 4.15%, while gold rose 1.7% to $5,191.8 an ounce. Bitcoin led gains in cryptocurrency markets, increasing 2.6% to $70,863.

Investors are closely monitoring both geopolitical developments and potential US policy changes, as energy markets remain highly sensitive to disruptions in the Middle East.

Global oil prices jumped sharply on Monday as investors assessed the growing impact of the war in Iran on energy production and shipping routes across the Middle East.

Crude prices rose above $114 per barrel for the first time since 2022 after trading resumed on the Chicago Mercantile Exchange. The sharp increase reflects rising concerns that the conflict could disrupt key oil supply routes and reduce production in one of the world’s most important energy regions.

Brent crude, the international benchmark for oil prices, climbed past $114 a barrel during early trading. The price represented a rise of about 23 per cent compared with its closing level of $92.69 on Friday.

West Texas Intermediate crude, the main oil benchmark in the United States, also approached $114 per barrel. That marked an increase of roughly 25 per cent from its Friday close of $90.90.

The latest surge follows a week of steep gains. US crude prices rose by 36 per cent last week, while Brent crude climbed by about 28 per cent as the conflict entered its second week and expanded across the region.

Investors are closely watching developments in the Persian Gulf, where several countries play a central role in the global energy market. The war has already drawn attention to locations critical for the production and transport of oil and natural gas.

Tensions intensified early Monday after Bahrain accused Iran of striking a desalination facility that supplies drinking water. At the same time, fires were reported at oil depots in Tehran after overnight Israeli strikes.

Market anxiety has also been fuelled by risks to shipping routes in the Strait of Hormuz, one of the most important energy corridors in the world. According to energy research firm Rystad Energy, roughly 15 million barrels of crude oil pass through the strait each day. That volume represents about 20 per cent of the world’s total oil supply.

The narrow waterway lies between Iran and Oman and serves as a key route for oil and gas shipments from major producers including Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain and the United Arab Emirates.

The possibility of Iranian missile or drone attacks has sharply reduced tanker traffic through the strait. Shipping companies have reportedly become cautious about sending vessels through the area due to security risks.

The rapid rise in prices has sparked discussions among leading economies about possible steps to stabilise energy markets. The Financial Times reported on Monday that finance ministers from the Group of Seven nations plan to discuss the potential release of oil from emergency reserves.

Any coordinated action would likely involve the International Energy Agency, which oversees strategic petroleum reserves held by several major industrialised countries. These reserves can be released during supply disruptions in order to ease pressure on global markets.

The International Energy Agency has not yet commented publicly on the possibility of a coordinated release. Observers say decisions taken in the coming days could influence oil markets as the conflict continues to unfold.