Worries about economic pain deepen amid Iran war The Associated Press / A worker walks on the deck of a feeder vessel as he works to offload cargo of rice into trucks Friday at Umm Qasr Port, a deep-water port, in the city of Umm Qasr, Iraq.
WASHINGTON — U.S. and Israeli attacks on Iran have driven up prices, darkened the outlook for the world economy, sent global stock markets reeling and forced developing countries to ration fuel and subsidize energy costs to protect their poorest.
Ongoing strikes and counterstrikes on Persian Gulf refineries, pipelines, gas fields and tanker terminals threaten to the prolong the global economic pain for months, even years.
“A week ago or certainly two weeks ago, I would have said: If the war stopped that day, the long-term implications would be pretty small,” said Christopher Knittel, an energy economist at the Massachusetts Institute of Technology. “But what we’re seeing is infrastructure actually being destroyed, which means the ramifications of this war are going to be long-lived.”
Iran has hit Qatar’s Ras Laffan natural gas terminal, which produces 20% of the world’s liquefied natural gas. The March 18 strike wiped out 17% of Qatar’s LNG export capacity and repairs will take up to five years, state-owned QatarEnergy said.
The war caused an oil shock from the get-go. Iran responded to U.S. and Israeli attacks Feb. 28 by effectively closing off the Strait of Hormuz, a transit point for a fifth of the world’s oil, by threatening tankers trying to pass through.
Gulf oil exporters like Kuwait and Iraq cut production because there was nowhere for their oil to go without access to the strait. The loss of 20 million barrels of oil a day delivered what the International Energy Agency calls the “largest supply disruption in the history of the global oil market.”
The price for a barrel of Brent crude oil climbed 3.4% on Friday to settle at $105.32. That was up from roughly $70 just before the war began. Benchmark U.S. crude rose 5.5% to settle at $99.64 per barrel.
“Historically, oil price shocks like this have led to global recessions,” Knittel said.
The war also has dredged up a bad economic memory from the oil shocks of the 1970s: stagflation.
“You’re raising the risk of higher inflation and lower growth,” said the Harvard Kennedy School’s Carmen Reinhart, a former World Bank chief economist.
Gita Gopinath, former chief economist at the International Monetary Fund, recently wrote that global economic growth, expected before the war to register 3.3% this year, would be 0.3 to 0.4 percentage points lower if oil prices averaged $85 a barrel in 2026.
The Persian Gulf accounts for a big share of exports of two key fertilizers, a third of urea and a quarter of ammonia. Producers in the region enjoy an advantage: easy access to low-cost natural gas, the primary feedstock for nitrogen fertilizers.
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