In world history, there are conflicts that redraw the map of the battlefield. And there are conflicts that redraw the map of the economy. A war around Iran belongs to the latter category. Its consequences are not limited to strikes, force redeployments, and diplomatic statements. It has the potential to hit three pillars of the modern global system at once - energy, the cost of money, and the debt sustainability of dozens of states.
When these three lines of crisis converge at one point, what begins is not just another regional war, but a global restructuring of economic reality.
The most dangerous illusion is that many still view a potential large-scale war with Iran through the lens of the twentieth century: oil prices rise, markets panic, and then everything gradually stabilizes. But today’s world is structured differently. It is far more indebted, more dependent on logistical choke points, more sensitive to interest rates, and at the same time less resilient to sharp price shocks. If in the 1970s an oil shock alone was already a catastrophe, in the 2020s it becomes merely the first blow in a long chain of secondary disruptions.
Iran is not just a regional power. It is a state around which the routes of the Persian Gulf are tied - oil transport, gas logistics, maritime insurance, Asia’s energy security, and price stability in dozens of import-dependent countries. The moment military action affects extraction, export infrastructure, tanker routes, refining, or transportation, the market reacts not as to a local conflict, but as to a threat to one of the most vital arteries of the global economy.
A sober look at the numbers is required. A colossal share of global hydrocarbon flows passes through the Persian Gulf region. Even a temporary disruption in stability in this zone can remove millions of barrels per day from the normal rhythm of supply. And in the oil market, sometimes a deficit of just one to two percent of global supply is enough to send prices surging by tens of percent. The oil market does not tolerate even a hint of disruption. It instantly embeds geopolitics into price. If we are not talking about a hint but about direct strikes on infrastructure, then the risk premium begins to grow exponentially.
In such situations, oil becomes more expensive not only because there may be less of it. It becomes more expensive because the entire system begins pricing in fear. Fear of attacks on terminals. Fear of mined routes. Fear of rising insurance costs for vessels. Fear of port disruptions. Fear of the expansion of the war zone. In practice, this means that a barrel can rise in price not only due to physical shortages, but because the entire supply chain becomes more expensive, slower, and more dangerous.
Then the second stage begins - inflationary. Energy is present everywhere in the modern economy. It is not only gasoline at the pump or gas in pipelines. It is the cost of transportation, the production of plastics, chemicals, fertilizers, metals, cement, glass, packaging, food. Oil rises - diesel rises. Diesel rises - logistics costs rise. Logistics costs rise - food, construction materials, appliances, and medicines become more expensive. Gas rises - production costs for fertilizers and electricity increase. Then agriculture, the food industry, and utilities follow.
A military strike in the Middle East quickly transforms into a hit on the wallet of any family - from Cairo to Berlin, from Karachi to Nairobi, from Tashkent to Buenos Aires. This is the real scale of the problem. The war is physically in one place, but inflation spreads across the entire world.
But even this is not the end. The third and most dangerous phase begins - monetary and debt-related. When an energy shock fuels inflation, central banks are forced to keep rates high or raise them further. For ordinary citizens, this means expensive mortgages, car loans, and consumer credit. For businesses - higher capital costs, slower investment, and increased debt servicing burdens. And for governments, especially poor and highly indebted ones, it becomes a trap.
A significant portion of global debt is denominated in dollars. When dollar rates are high, servicing obligations becomes harder. When fuel and food imports simultaneously become more expensive, pressure on budgets intensifies. When investors become nervous, they demand higher yields on bonds from developing countries. And when yields rise, governments face a choice with no good options - either borrow at higher cost or cut spending.
Today, this choice is particularly severe because the world is already overloaded with debt. Total global debt is no longer measured in tens, but in hundreds of trillions of dollars. Public debt in many developing countries has multiplied over the past 10 to 15 years. In many low- and middle-income economies, the debt-to-GDP ratio has long exceeded comfortable levels. In some countries, interest payments consume a larger share of the budget than education or healthcare. This is not a metaphor. It is the new reality for a significant part of the global South.
Over the past decade, the share of countries in or near debt crisis has more than doubled - from 24 percent to 54 percent. This is one of the most alarming figures in the modern world. It means that more than half of vulnerable countries are already living either in a zone of financial emergency or on its edge. They do not need a massive global collapse to fall. A new shock in commodity markets, a few quarters of expensive money, and a weakening national currency are enough.
That is why a war with Iran is dangerous not only for the oil market but for the entire architecture of sovereign debt. The more expensive energy becomes, the higher inflation rises. The higher inflation, the longer interest rates remain elevated. The longer rates stay high, the harder it becomes for poorer countries to service dollar-denominated debt. The harder it becomes, the closer come restructuring, devaluation, budget cuts, and social unrest.
History has already seen this mechanism. In 1973, after the Yom Kippur War, the OPEC oil embargo caused oil prices to surge by roughly 300 percent within six months. This shock became a powerful amplifier of global inflation. By the end of the decade, the United States faced unprecedented price pressure. Then came a period of harsh monetary policy. In 1979, Paul Volcker initiated radical tightening, and U.S. rates soared to around 20 percent. For developed economies, it was painful. For developing ones, devastating.
Why? Because a massive portion of their debt was tied to the dollar. When U.S. rates skyrocketed, debt servicing for countries in Latin America, Africa, and parts of Asia became dramatically more expensive. In 1982, Mexico declared it could no longer fully service its obligations. Then the crisis spread. Defaults, devaluations, budget cuts, contraction of consumption, and declining real incomes followed. This period became known as the lost decade - lost not on stock exchanges, but in the lives of millions.
Today, the world risks repeating that trajectory in an even more complex form. Back then, the creditor system was relatively straightforward. Today, the debt landscape is far more intricate. Alongside traditional Western institutions and private markets, Chinese creditors play a major role, accounting for about 31 percent of bilateral debt in developing countries. This is crucial, because restructuring debt becomes much harder when there are many creditors with different legal regimes and political interests. One debt can be rolled over, another requires months of negotiation, a third depends on market investors, a fourth is tied to domestic politics. As a result, a debt crisis becomes not only more severe, but more prolonged.
This is why the consequences of a war with Iran may not be a short-term shock, but a prolonged era of expensive energy, expensive money, and chronic instability. Even if military action does not lead to full-scale destruction of export infrastructure, the constant threat itself will keep the risk premium elevated. That means higher freight costs, higher insurance costs, more volatile commodity markets, more cautious investors, weaker currencies among importers, and a heavier burden on consumers.
The most vulnerable will be poor, import-dependent countries. Their problem is that they are almost always last in line for resources and first in line to pay the price. Wealthy states can cushion price increases through subsidies, reserves, access to cheap credit, and strong government support. Poor countries cannot. Any rise in fuel prices hits their foreign reserves. Any devaluation drives up food prices. Any increase in interest rates strains their budgets. And any budget crisis immediately affects schools, hospitals, utilities, and social programs.
This is why the real victims of such a conflict are not only on the battlefield. They are children in countries where school meals are cut after price spikes. They are elderly people whose governments can no longer subsidize medicines. They are small businesses that cannot survive another jump in tariffs and credit costs. They are farmers buying more expensive fertilizers and then selling more expensive food to cities. They are young people whose lives are once again postponed indefinitely by crisis.
There is another danger often overlooked. An energy shock rarely remains purely energy-related. It quickly becomes political. When electricity, transport, and food bills rise, trust in governments erodes. When budgets are cut, social frustration turns into protest. When currencies weaken and prices do not stabilize, capital flight and market panic begin. For fragile states, this is not just a macroeconomic episode. It is a risk of systemic destabilization.
In such an environment, a war with Iran becomes the perfect detonator for a new global cycle of instability. It hits Asia through energy supplies, Europe through inflation and gas markets, the developing world through debt and currencies, international trade through logistics and insurance, and financial markets through uncertainty and flight to safe assets. There is virtually no major region that could emerge unscathed.
The most dangerous factor is not the initial shock, but the duration of its effects. Financial markets often absorb a sharp shock and then partially stabilize. But infrastructure does not recover in a week. Maritime routes do not become safe overnight. Investor confidence does not return on command. Even if a ceasefire formally holds, rebuilding damaged facilities can take years. Expert assessments already suggest up to five years for full restoration of heavily damaged energy infrastructure. Five years in the global economy is a very long time.
Therefore, the main question is not whether there will be a short-term price surge. That is almost inevitable. The real question is whether it will evolve into a new debt era in which dozens of countries move from restructuring to restructuring, from devaluation to devaluation, from budget cuts to budget cuts. And here, the probability is already very high, because the starting conditions are extremely weak.
The world enters this potential storm in a state of exhaustion. After the pandemic, many countries saw their debt surge. After the inflation wave of 2021 to 2024, borrowing costs increased. After logistical disruptions and sanction conflicts, global predictability declined. The system has not regained resilience, and yet a new spark is being brought to the most dangerous point - the energy hub and the global debt market.
This is the fundamental truth about a war with Iran. It is not merely a conflict over influence, borders, missiles, or alliances. It is a potential trigger for a new global economic crisis, where oil will be only the beginning, inflation the continuation, and a debt catastrophe the outcome. And if this mechanism is set in motion, the price will be paid not only by oil traders and governments, but by millions of ordinary people in countries that are not even part of the war.
The most alarming aspect of such conflicts is that their true destructive force often does not appear on day one or on front pages. It emerges later - in devalued currencies, cut social programs, closed factories, more expensive bread, empty pharmacies, and lost years of development. This is how a war in one part of the world becomes a crisis for the entire planet.
A clear-eyed conclusion follows. A war with Iran can overturn the global economy not because oil production might halt for a few weeks, but because it can simultaneously destroy energy stability, shatter inflation expectations, prolong the era of expensive money, and push dozens of vulnerable countries toward a debt cliff. This is no longer just a risk. It is an almost complete formula for large-scale global turbulence.
The Strait of Hormuz becomes the central nerve of the global economy in this scenario. It is not just a narrow maritime passage, but an artery through which, under normal conditions, about 20.9 million barrels of oil and petroleum products pass daily. This is roughly one fifth of global liquid hydrocarbon consumption and more than a quarter of all seaborne oil trade. In 2024, about 20 million barrels per day passed through the strait, and even these figures alone explain why any disruption automatically becomes a global issue. Moreover, it is not only oil - about one fifth of global LNG trade also passes through this corridor. For the global economy, the implication is simple: if Hormuz is disrupted, the crisis instantly extends beyond the Middle East.
The market fears not only a full blockade. Even partial disruption - strikes on terminals, insurance breakdowns, rising freight costs, tanker delays - is enough. The energy market is extremely sensitive to shortages. Sometimes a loss of just one to two percent of supply can push prices up by tens of percent. If constraints in Hormuz persist, the scale is no longer symbolic. By some estimates, in March 2026 forced production cuts among countries dependent on this route reached about 7.5 million barrels per day, could have risen to 9.1 million in April, and even with gradual recovery remained around 6.7 million in May. This is not market noise, but a systemic shock to physical supply.
The first conclusion for the oil market is clear. The main threat is not simply high prices, but high prices sustained over time. A short spike can still be absorbed through reserves. A prolonged period of elevated prices hits fuel importers, industry, transport, agriculture, and government budgets. Asia will be especially vulnerable, as it is the primary consumer of flows from Hormuz. Approximately 89 percent of oil and condensate passing through the strait in the first half of 2025 was directed to Asia. China, India, Japan, and South Korea together accounted for 74 percent of these flows. This means that any serious disruption in Hormuz becomes a direct удар on the industrial heart of Asia.
China, India, Europe, and the Debt Trap: The Second Wave of the Crisis
China stands at the center of this system. For Beijing, the issue is not only the price of oil, but the stability of its entire export-industrial model. The Chinese economy can absorb part of the external shock thanks to its scale, reserves, state control, and diversified supply chains. Yet even for China, prolonged energy stress is deeply destabilizing. Expensive oil translates into pressure on industrial costs, transportation, domestic prices, and global competitiveness. Add expensive LNG to the equation, and the strain spreads further - into the power system, the chemical industry, and the entire heavy manufacturing chain. For the world’s largest factory, this is no longer a localized disturbance but a recalibration of growth rates and export margins.
India is even more vulnerable. Its economic expansion is tightly bound to affordable energy. The Indian model rests on a combination of industrial growth, rapid urbanization, rising consumption, and massive infrastructure investment. All of this depends on stable and predictable fuel prices. When oil becomes more expensive, India is hit simultaneously on multiple fronts - trade balance, inflation, currency stability, fiscal pressure, and social spending. For a fast-growing economy with a vast population, an energy shock quickly becomes a political shock. Rising fuel prices feed directly into transportation costs, food prices, and everyday life. When such shocks repeat, the government faces a stark choice - subsidize the market or pass the burden onto households and businesses.
Europe’s position is somewhat different, but far from secure. Its direct dependence on the Strait of Hormuz for oil and LNG is lower than Asia’s, yet it remains highly sensitive to the global gas market and overall price dynamics. In 2025, roughly 7 percent of Europe’s LNG imports passed through Hormuz, compared to about 27 percent for Asia. At first glance, this suggests relative insulation. But that is only part of the picture. Europe’s gas market is already volatile. In the first half of 2025, despite a 4 percent increase in global LNG supply, European and Asian benchmark prices remained approximately 30 percent and 40 percent higher, respectively, than a year earlier. In other words, even without a catastrophic scenario, Europe is already operating in a high-cost, unstable gas environment. If disruptions in Hormuz intensify, Europe is forced into direct competition with Asia for limited LNG supplies, driving prices even higher.
The gas market may prove no less painful than oil. One critical factor often underestimated is Qatar. In 2024, about 20 percent of global LNG trade passed through Hormuz, with most of it originating from Qatar and, to a lesser extent, the UAE. Qatar alone exported roughly 9.3 billion cubic feet of LNG per day through this route, with the UAE contributing another 0.7. If these volumes shrink, Asia and Europe enter direct competition for constrained supply. U.S. export capacity is already near its limits - LNG exports approached 18 billion cubic feet per day in March, close to record levels. This means the market cannot be quickly flooded with additional supply. This is precisely the trap in which a gas shock can become prolonged.
At this stage, the Federal Reserve enters the equation decisively. As soon as the energy shock fuels inflation, the Fed faces an uncomfortable dilemma. On one hand, high interest rates weigh on economic activity. On the other, easing policy under inflationary pressure risks losing control over prices. As of late January 2026, the federal funds target range remained at 3.5 to 3.75 percent. The implication is clear: even if the U.S. economy can withstand expensive energy, the rest of the world will pay through a prolonged period of a strong dollar and elevated rates.
This is where the energy crisis fully transforms into a debt crisis. A significant share of external obligations in developing economies is denominated in dollars. The longer the Fed keeps rates high, the harder it becomes to service this debt. When combined with rising costs of fuel, raw materials, and food imports, the situation becomes explosive. External debt in low- and middle-income countries has already reached a record 8.9 trillion dollars, while the 78 most vulnerable countries eligible for concessional financing owe around 1.2 trillion. Interest payments alone have climbed to a record 415 billion dollars. This is no longer abstract data - it is a measure of how little room remains for another major shock.
The situation in the poorest countries is even more severe. Already, 54 percent of low-income countries are either in debt distress or at high risk of it. Net interest payments across developing economies have reached 921 billion dollars, and 61 countries are allocating 10 percent or more of their government revenues solely to interest. When a state spends that much just servicing debt, it does not cut abstract numbers - it cuts schools, hospitals, infrastructure, and food programs.
For these countries, three scenarios emerge - bad, very bad, and catastrophic.
The first scenario is painful adjustment. Oil and gas prices rise but do not enter a phase of prolonged supply collapse. In this case, poorer countries may still hold on through emergency subsidies, bilateral support, import compression, and internal austerity. Even then, they face rising inflation, currency depreciation, deteriorating balance of payments, and reduced development spending. This is a slow suffocation, not a collapse.
The second scenario is a debt spiral. The energy shock persists, Fed rates remain elevated, developing-world currencies weaken, and investors demand ever higher risk premiums. The classic chain reaction begins - rising debt costs, loss of market access, urgent negotiations with creditors, devaluation, budget cuts, rising poverty, and social tension. This is no longer just economic pain, but systemic institutional degradation.
The third scenario is a cascading crisis. It unfolds if expensive energy and expensive money are compounded by poor harvests, political instability, climate shocks, or new trade barriers. In this case, isolated defaults begin to merge into a broader wave, while the global debt restructuring system becomes overwhelmed. Countries reach a point where servicing past obligations takes precedence over funding the state itself. This is a direct path to a lost decade for much of the global South.
This is the ultimate turning point. The Strait of Hormuz in this crisis is not merely a geographic chokepoint. It is a valve through which flows not only oil and gas, but the stability of the global economy. The oil market faces the risk of physical shortages. The gas market faces the risk of a prolonged price war between Asia and Europe. China absorbs a shock to its industrial system. India faces pressure on its growth model. Europe confronts an already fragile energy balance. The Federal Reserve faces a renewed inflation dilemma. And the poorest countries face the threat of debt suffocation.
The most accurate definition of the situation is therefore clear: the conflict around Iran is not simply a regional war with global consequences. It is a potential mechanism for resetting a global crisis, where a single narrow strait can destabilize the oil market, then the gas market, then the monetary system, and finally the social stability of entire states. If this chain is not broken quickly, the world will not enter a short phase of turbulence, but a prolonged era of expensive energy, expensive money, and a new great divide between those who can withstand the shock and those who will be broken by it.