The War with Iran is spreading economic damage far beyond just oil and gas markets. As the U.S.-Israeli assault on Iran enters its second week in March 2026, the conflict has severely disrupted global trade through the Strait of Hormuz—a narrow waterway that normally handles about one-fifth of the world’s oil and a significant portion of liquefied natural gas (LNG). Iranian missile and drone attacks have paralyzed much of the ocean and air traffic linking Asia and Europe, causing widespread economic fallout.
The effects go well beyond energy prices. The closure of major airports in the conflict zone, including Dubai’s—the world’s busiest for international passengers—has knocked out nearly one-fifth of global airfreight capacity. This has halted shipments of high-value goods like consumer electronics, pharmaceuticals, precious metals, computer chips, aerospace parts, fast fashion, flowers, and medical supplies. Air shipping costs from Asia to Europe have surged 45 percent since the war started, more than double the rise for routes to the United States, according to Ryan Petersen, CEO of freight forwarder Flexport.
This uneven impact highlights a key reality: Europe and Asia are bearing the brunt of the damage, and it’s hitting them harder and faster than the United States. Europe and Asia rely heavily on energy imports passing through the Strait of Hormuz, making them more exposed to supply shocks. Their proximity to the fighting adds to the vulnerability, as explained by Maurice Obstfeld, a former chief economist at the International Monetary Fund.
Countries like Italy, Belgium, China, India, and South Korea—major importers of oil and gas via the strait—are suffering some of the worst consequences. In the euro zone, inflation was already running hotter than expected in February, and soaring energy costs are set to worsen it. QatarEnergy’s LNG production has shut down after Iranian attacks, potentially forcing European and Asian buyers into a fierce bidding war for limited supplies, according to analysts at TS Lombard in London.
Asia faces particularly tough challenges. South Korea’s stock market plunged 20 percent before a partial rebound, while India’s rupee hit its lowest level against the dollar in over half a century. India spends billions subsidizing retail energy prices each year, so prolonged disruptions could strain government budgets severely. “If this is a protracted conflict, Asia is going to feel a very difficult sting,” warned Eric Robertsen, global head of research at Standard Chartered in Dubai.
Maritime traffic through the Strait of Hormuz has dropped 90 percent from pre-war levels, per tracking service MarineTraffic. Tanker incidents, including explosions and spills reported near Kuwait, have added to the chaos. Fifty-seven container ships are trapped inside the strait, though they represent less than 1 percent of global capacity. Many more vessels are stuck in the northern Gulf, diverted, or simply avoiding the area. Major carriers like Maersk have suspended bookings to and from several Gulf countries, including the UAE, Oman, Iraq, Kuwait, Qatar, Bahrain, and Saudi Arabia. This creates backlogs at origin ports worldwide, delaying goods and raising costs.
Air cargo has suffered even more acutely. Airspace closures in the UAE, Qatar, Bahrain, Kuwait, Iraq, and Iran have slashed capacity. Planes now take longer, fuel-heavy detour routes—such as threading through Turkmenistan to avoid Iranian airspace and restricted Russian skies—further reducing available freight space. Jet fuel prices have spiked dramatically, with one European benchmark up 72 percent since the war began, approaching levels seen after Russia’s 2022 invasion of Ukraine.
Logistics executives compare the situation to the COVID-era disruptions, with backlogs building in Southeast Asia and China. Catching up could take weeks or longer, as carriers like DHL and Kuehne + Nagel struggle to replan amid ongoing instability.
American consumers and businesses aren’t immune. U.S. gasoline prices have climbed to an average of $3.41 per gallon, up from $2.98 just a week ago, according to AAA. Farmers face rising costs for key fertilizers like urea and anhydrous ammonia, as top producers—Saudi Arabia, Qatar, and Iran—are in the conflict zone. Urea prices jumped about 25 percent last week, with more increases likely if the strait stays closed. China, another major producer, has restricted exports until at least August, heightening risks for the planting season.
Wall Street saw the S&P 500 drop about 2 percent last week, but losses elsewhere were steeper. The conflict’s ripple effects—higher shipping, energy, and input costs—could fuel inflation and supply chain headaches if it drags on longer than expected.
While supply chain managers have grown accustomed to crises like the pandemic and Ukraine war, the current upheaval tests their limits. Airports and warehouses lack infinite capacity to absorb rerouted cargo, and temporary U.S. tariff reductions (following a Supreme Court ruling) are spurring a rush of imports from places like India, which could clash with strained airfreight availability.
In short, the war with Iran is no longer just a regional conflict—it’s triggering global economic shockwaves that threaten higher prices, disrupted trade, and uneven pain across continents. Europe and Asia feel the immediate sting most acutely, but prolonged fighting could spread the damage much wider.