Iran war and economic recession

If the joint attacks by the US and Israel on Iran and Iran’s retaliatory actions continue, it could disrupt global economic and energy markets. The UN World Food Programme’s deputy executive director, Carl Skau, warned that over 4.5 crore people in the region could face starvation. Since the war began, shipping costs have already risen by 18 percent. Experts fear that if the conflict continues, it could push the world toward historically high levels of food insecurity.

The war began on February 28 when Israel attacked Iran. Since then, crude oil prices have increased. Attacks on various oil storage facilities in the Gulf have disrupted production. Iran has also targeted and blocked several ships passing through the Strait of Hormuz. Even if oil is produced in the Gulf, the situation has worsened to the point that it cannot be exported to other countries. About 20 percent of the world’s oil and natural gas supply passes through the Strait of Hormuz. When the conflict began, Brent crude was priced at $72 per barrel; it has now risen to $108. Similarly, liquefied natural gas (LNG) prices have increased by around 60 percent. Asian countries, including India, are experiencing severe shortages of cooking gas, and concerns are growing about potential shortages of petrol and diesel next.

Figures show that in 2024, 84 percent of the crude oil and 82 percent of the LNG that passed through the Strait of Hormuz went to Asia. China, India, Japan, and South Korea accounted for 70 percent of this supply. Experts warn that if the war continues into the next month, oil prices could reach around $130 per barrel. This could lead to higher oil prices, inflation, price hikes, and eventual economic recession across West Asia. Countries heavily dependent on fuel imports may see their domestic production efficiency drop due to rising import costs. In India, petroleum product prices may increase in April due to these rising oil prices.

In countries such as Cambodia, Laos, Vietnam, and Pakistan, petrol prices are already around 50 percent higher than usual. In Pakistan, the government has reduced the workweek for employees to four days and placed 50 percent of staff on rotation to manage fuel scarcity. Similar restrictions have been implemented in Thailand and Sri Lanka. Global stock markets have also seen significant declines since the war began, with Asian markets being the most affected. The International Monetary Fund (IMF) has warned that if the conflict continues, the global economy could face serious inflationary risks.