Seven weeks of US and Israeli military strikes on Iran have triggered what the International Energy Agency (IEA) is calling "the largest supply disruption in the history of the global oil market", with the Strait of Hormuz — the narrow waterway between the Persian Gulf and the Gulf of Oman through which roughly one-fifth of the world's oil and liquefied natural gas (LNG) passes — effectively closed to normal shipping traffic. Transit through the strait has fallen by 95 percent since early March, removing an estimated 10 million barrels of oil per day from global supply. A brief reopening late last week offered temporary relief to financial markets, but analysts warn the reprieve is fragile: as of mid-April, no formal agreement has been reached between the US and Iran, and Tehran retains effective control of the chokepoint.

The economic consequences are cascading across the globe at uneven speed and severity. The International Monetary Fund has described the outlook as an "abrupt darkening", projecting global growth of just 3.1 percent this year alongside rising inflation — a combination that risks tipping the world into stagflation or outright recession. The IEA warns that damage to roughly 80 energy installations across the Gulf, with a third suffering serious harm, means LNG production capacity could take years to rebuild. The IMF has estimated it may provide between $20 billion and $50 billion in emergency balance-of-payments assistance globally, and warns that even in a best-case scenario, recovery to pre-war conditions could take two years or more.

The crisis is hitting the Global South hardest. In Pakistan, where over 80 percent of oil needs are met through imports and more than 80 percent of energy imports transit the Strait of Hormuz, petrol prices surged by more than 40 percent in early April before a partial rollback. Economists warn inflation could reach 17 percent if the conflict persists, and the country faces a $4.8 billion debt repayment crunch this month alone. The Philippines has declared a national energy emergency and cut the working week to four days; Pakistan and Bangladesh have taken similar steps. India has seen the emergence of black-market fuel trade. A UNDP report warns the war's fallout could push more than 32 million people worldwide into poverty. Australia, which imports around 80 percent of its refined fuel from refining hubs in Singapore, South Korea and Malaysia that are themselves dependent on Gulf crude, has turned to "fuel diplomacy" — with its prime minister travelling to Southeast Asia to secure supplies — while states offer free or subsidised public transport to dampen demand. A fire at the Geelong Oil Refinery in Victoria this week underscored the country's acute structural vulnerability.

In Europe, the picture is less dire but the alarm is real. The EU's energy commissioner has warned that restrictions on jet fuel could begin within six weeks, and airline KLM has already cancelled 160 flights. Germany is holding emergency talks with industry. European policymakers are drawing up contingency measures including mandatory remote-working days, closure of public buildings and incentives to shift to public transport. Energy analysts note a troubling divergence: financial markets are pricing oil at $80–90 per barrel, while physical spot purchases in Singapore are trading at roughly $300 per barrel — a sign that real-world supply stress far exceeds what headline prices suggest.

Beyond the immediate energy crunch, analysts point to deeper structural shifts. Trust in the US security umbrella among Gulf states has eroded, and the war has strained the transatlantic alliance after European nations declined to join the conflict and were not consulted before it began. Israel faces unprecedented diplomatic isolation, with Spain imposing an arms embargo and France denying US aircraft use of its airspace to transport weapons. Iran, though battered, has demonstrated its capacity to control the region's energy exports, which may ultimately push Gulf states toward a new modus vivendi with Tehran. The IEA's chief has warned that shortages of kerosene for aviation could begin within weeks if the Hormuz situation is not durably resolved. IMF chief Kristalina Georgieva has said that even after peace is achieved, the war will permanently "scar" the global economy.