The Iran war launched by the US and Israel in early March 2026 has already inflicted substantial, and in many respects structurally durable, damage to the global economy, regional security architecture, and the long\u2011term reputation of the Gulf as a stable energy hub. Analysts at the International Energy Agency, Chatham House, and major investment banks describe the conflict as producing the largest energy\u2011supply shock since the 1970s, with approximately 15\u201320 per cent of global oil and gas flows effectively blocked or rerouted by the closure or militarisation of the Strait of Hormuz, while the UK\u2019s independent Office for Budget Responsibility warns of lasting inflationary pressure and slower growth if the disruption persists. The war has also deepened the geopolitical fracture between the US\u2011led bloc and China\u2011backed powers, strengthened discourses of de\u2011globalisation, and exposed the fragility of just\u2011in\u2011time supply chains now dependent on an increasingly volatile Middle East.<\/p>\n
The clearest lasting damage so far has been to global energy markets and the macroeconomic frameworks of net\u2011importing economies. Brent crude surged from roughly 70 dollars a barrel to the low\u2011to\u2011mid 80s in the first week, while liquefied natural gas (LNG) and pipeline\u2011gas prices in Europe spiked by around 40 per cent, with UK wholesale gas prices almost doubling over a few days, even before the next energy\u2011price\u2011cap review in July. Stock markets globally have already absorbed significant losses: the FTSE\u2011100 in London, the STOXX\u2011600 in Europe, and major Gulf indices such as Saudi Arabia\u2019s Tadawul have all shed multiple percentage points since the war began, eroding household and pension\u2011fund wealth and tightening risk premiums across credit markets. The International Monetary Fund and private\u2011sector forecasters now expect lower global growth for 2026, with the risk of stagflation, higher inflation combined with weaker output, particularly for Europe and the UK, where households remain highly exposed to wholesale\u2011energy\u2011price movements despite existing price caps and windfall\u2011tax mechanisms on North Sea producers.<\/p>\n
On the ground, the physical and human damage inside Iran and its neighbours is already severe and is likely to shape the region\u2019s development trajectory for years. US\u2011Israeli air and missile attacks have reportedly hit more than 6,000 civilian\u2011related sites, including thousands of residential buildings, hundreds of commercial units, dozens of schools and medical centres, and numerous Iranian\u2011Red\u2011Crescent\u2011affiliated facilities, with Iranian state and humanitarian\u2011sector sources recording well over a thousand civilian deaths and many more injuries, including hundreds of children. Energy infrastructure across the Gulf has also suffered long\u2011term setbacks: Ras Laffan in Qatar, one of the world\u2019s largest LNG\u2011processing hubs, reported \u201cextensive damage\u201d from Iranian strikes, forcing the declaration of force majeure on gas exports and likely requiring months of repair; the United Arab Emirates and others have shut or throttled gas and oil\u2011processing operations, further tightening the global supply\u2011curv. If the conflict persists beyond a few months, Chatham House and similar institutions project that Iranian GDP could contract by more than 10 per cent, while Gulf economies dependent on tourism, foreign labour mobility, and safe commuter-air and seaplanes, including the UAE and Qatar, risk sustained capital flight and a reputational blow that may endure well beyond any formal ceasefire.<\/p>\n
Beyond immediate economic and physical scars, the Iran war has already pushed the world economy toward a more fragmented, sanctions\u2011heavy, and energy\u2011security\u2011obsessed order. The systemic targeting of energy infrastructure by both sides has effectively turned the Gulf into a semi\u2011permanent battlefield, which in turn encourages states to internalise more of their supply chains, stockpile strategic reserves, and re\u2011regulate cross\u2011border finance and energy\u2011flows under strengthened national\u2011security\u2011and\u2011sanctions\u2011law frameworks such as the UK\u2019s Sanctions and Anti\u2011Money Laundering Act 2018 and its EU\u2011derived counterparts. The UK and Europe, already reeling from previous energy\u2011shocks linked to the Nord Stream pipeline attacks and the Russia\u2011sanctions regime, now face a second, larger disruption that may force a structural re\u2011evaluation of how much they can rely on Middle\u2011Eastern energy and how much they must invest in domestic renewable capacity and liquefied fuel diversification, even if such investments cannot yield immediate price relief. Viewed in cold terms, the lasting damage is therefore threefold: a measurable, front\u2011loaded hit to global growth and financial\u2011asset values; a deep and partly reversible erosion of Iranian and Gulf\u2011regional\u2011infrastructure and human\u2011capital; and a more enduring drift toward a less integrated, more militarised\u2011energy\u2011order where the risks of any future Middle\u2011Eastern conflict will be discounted into capital costs, trade\u2011routes, and monetary\u2011policy\u2011calibrations for decades to come.<\/p>\n","protected":false},"excerpt":{"rendered":"
The Iran war launched by the US and Israel in early March 2026 has already inflicted substantial, and in many\u2026<\/p>\n","protected":false},"author":446,"featured_media":6084,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[3221,1771,3222],"class_list":["post-6073","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-ftse-100","tag-ras-laffan","tag-stoxx-600"],"reading_time":"4 min read","_links":{"self":[{"href":"https:\/\/www.businessupturn.com\/trade-policy\/wp-json\/wp\/v2\/posts\/6073","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.businessupturn.com\/trade-policy\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.businessupturn.com\/trade-policy\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.businessupturn.com\/trade-policy\/wp-json\/wp\/v2\/users\/446"}],"replies":[{"embeddable":true,"href":"https:\/\/www.businessupturn.com\/trade-policy\/wp-json\/wp\/v2\/comments?post=6073"}],"version-history":[{"count":1,"href":"https:\/\/www.businessupturn.com\/trade-policy\/wp-json\/wp\/v2\/posts\/6073\/revisions"}],"predecessor-version":[{"id":6085,"href":"https:\/\/www.businessupturn.com\/trade-policy\/wp-json\/wp\/v2\/posts\/6073\/revisions\/6085"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.businessupturn.com\/trade-policy\/wp-json\/wp\/v2\/media\/6084"}],"wp:attachment":[{"href":"https:\/\/www.businessupturn.com\/trade-policy\/wp-json\/wp\/v2\/media?parent=6073"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.businessupturn.com\/trade-policy\/wp-json\/wp\/v2\/categories?post=6073"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.businessupturn.com\/trade-policy\/wp-json\/wp\/v2\/tags?post=6073"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}