The ongoing military conflict between the United States, Israel, and Iran is inflicting severe damage on the global economy, with the United Nations warning that more than 32 million people could be pushed into poverty as a result. Stock markets tumbled on Monday after peace talks — held over 21 hours in Pakistan — collapsed without agreement, leaving a fragile two-week ceasefire in serious doubt and sending crude oil prices sharply higher. In India, benchmark indices the Sensex and Nifty fell steeply in early trade, with major firms including Titan, Sun Pharma and Bharti Airtel among the worst performers.

At the heart of the economic crisis is Iran's closure of the Strait of Hormuz, the narrow waterway through which an estimated 20 to 25 percent of global petroleum consumption passes, with roughly 80 percent of that oil destined for Asian markets. Oil prices have surged by more than 50 percent since the first US-Israeli airstrikes on Tehran six weeks ago, triggering a cascade of inflationary pressure across transportation, manufacturing and food systems. The UN Development Programme (UNDP) — the United Nations agency focused on reducing poverty — has described this as a "triple shock" affecting energy, food and overall economic growth. Because oil and gas prices can account for up to half of food price variability worldwide, the disruption is being felt most acutely in developing nations that rely heavily on imported fuel, including Pakistan, which is already experiencing rationing and industrial slowdowns.

In its worst-case scenario, the UNDP projects that 32.5 million people could fall below the upper-middle-income poverty line — defined by the World Bank as earning less than $8.30 per person per day. Half of that increase would be concentrated in 37 net energy-importing countries across Africa, Asia, the Gulf region and small island states. Alexander De Croo, the UNDP's administrator and former prime minister of Belgium, described the situation starkly: "A conflict like this is development in reverse. The people being pushed into poverty are very often the people who used to be in poverty, got out of it, and are now being pushed back." The International Monetary Fund has similarly warned that "scarring effects" from the conflict have already permanently damaged the global economy, even if a ceasefire holds.

The conflict carries a significant climate dimension as well. In just its first two weeks, the war generated more carbon emissions than the entire annual output of dozens of low-emitting countries combined — stemming from military operations, infrastructure destruction and burning oil facilities. More troubling still, energy insecurity is pushing nations, including European states, to reconsider their climate commitments and revert to fossil fuels for short-term stability, potentially locking in carbon-intensive infrastructure for decades. This comes at a moment when scientists warn that the remaining global carbon budget for limiting warming to 1.5 degrees Celsius — the target set by the 2015 Paris Agreement — is nearly exhausted.

The UNDP is calling for a coordinated global response, including targeted cash transfers costing approximately $6 billion to protect the most vulnerable households in developing countries. The appeal comes at a difficult moment: wealthy nations have cut overseas aid spending by $174.3 billion in 2025 — nearly a quarter less than the previous year — as governments prioritise defence budgets and manage elevated debt levels. De Croo argued that cutting development aid is strategically shortsighted: "Investments in development, to say it in military terms, are the ultimate pre-emptive strike. If you invest in poverty reduction, in strong institutions, in adapting to climate change, these are elements that will help you to stabilise the world."