Three weeks ago, the USA and Israel started to bomb Iran. An attack, at least on the US side, that does not seem to have an objective or an end game. But it may have huge repercussions for the global economy.
Knowing that they cannot defeat the Americans militarily, Iran has taken a different route. They are shutting down access to energy. 20% of the world’s oil travels through the Strait of Hormuz. This narrow piece of water is only 2 miles wide on each side, so it isn’t too difficult to disrupt. They have also attacked their neighbours and reduced energy production in the region.
While the US is energy independent, oil and gas is a global commodity. If the price of it goes up in one part of the world, it is felt everywhere. Trump boasted how this means that the US will make lots of money but it also means that the US people will have to pay more for fuel at the petrol pump. And if there is one thing that this car reliant country don’t like paying, it’s too much for fuel. It is not a good electoral move coming into the November midterms for the American people to be paying more for fuel.
With the cost of oil increasing, the cost of getting goods to the shops will also increase. It is going to cost more to produce goods and ship them to the shops, so these costs are going to be passed on to the consumer. The cost of fuel for airplanes will increase, so the cost of going on holidays will increase. Inflation is going to increase.
The biggest impact however is in Southeast Asia, where 80% of their energy comes from the Persian Gulf. Already, there has been an impact on the economy in this region with fisherman unable to take their boats out as they can’t afford the fuel. In Thailand, the air coniditioners in government offices have been turned down and employees have been encouraged to take the stairs instead of using the lift.
There is a bigger impact to this. As economies in these regions struggle with a lack of fuel, they will not be able to generate income. Governments and larger companies have debt in the form of bonds, usually sold in dollars. As their currency weakens, they will be unable to pay their debt and will default.
And who owns their debt? Large banks and pension funds around the world, mainly in Europe and the US. Which is going to have an impact on the financial system. And we can all remember what happened the financial system got into trouble…
Steven Barrett
23 March 2026