Global Economic Fallout: 13 Signs of US-Iran Conflict Shaking the World Economy
Jakarta, CNBC Indonesia — Conflict involving the United States, Israel, and Iran is beginning to trigger global economic shockwaves. From rising oil prices to plans for releasing global oil reserves and emergency policies from multiple nations to tackle energy volatility, the ripple effects are spreading worldwide.
- Oil Prices Rise Again
Oil prices increased again after stabilising on Tuesday. Today, the global benchmark Brent rose 1.8 per cent to more than US$85 per barrel, and the US WTI contract climbed more than 2 per cent, after prices previously peaked near US$120.
- Container Ships Struck
Unknown projectiles hit two cargo vessels off the coast of the United Arab Emirates. The incident was reported by Britain’s maritime security authority, UKMTO, as Iran escalates attacks in the Gulf and the nearby Strait of Hormuz.
- Fuel Queue Backlogs
Tanker truck drivers in Pakistan reported facing long queues at depots due to fuel shortages, whilst the government sought to ease concerns about further price hikes resulting from the conflict. Dozens of fuel tanker trucks were seen parked along roadsides at a depot near Lahore, the capital of Punjab, the country’s most populous province, on Tuesday.
- Drones Target Oil Fields
Saudi Arabia’s Defence Ministry said on Wednesday that it intercepted two drones heading towards the Shaybah oil field in the country’s south-east. In a subsequent update, they reported intercepting five additional drones heading towards the same oil field.
- European Central Bank Signals Inflation Concerns
European Central Bank President Christine Lagarde signalled rising inflation concerns. She stated that “everything necessary” would be done to keep inflation under control during the conflict.
“We will do everything necessary to keep inflation under control and ensure that France and Europe do not experience inflation increases like we saw in 2022 and 2023, which were partly caused by Russia’s invasion of Ukraine,” Lagarde told French broadcasters.
- UAE Oil Refinery Closure
The UAE’s largest oil refinery was shut down as a precautionary measure following a drone attack on the industrial complex where it is located, which caused a fire. This was stated by a source aware of the situation.
A driver working at the complex, who requested anonymity, told AFP that they witnessed “towering flames shooting from the complex”. “There was a loud sound like an explosion,” they said.
- Egypt Raises Fuel Prices
Egypt raised domestic fuel prices by up to 30 per cent. The government also sounded an “exceptional” alarm caused by the conflict, which has disrupted oil supplies and shipping routes.
“The price increases, announced by the petroleum ministry, apply to petrol, diesel, and natural gas used in vehicles,” the announcement stated.
- India Tightens Gas Controls
India ordered stricter controls on natural gas and cooking gas following import disruptions. Restaurants warned that the conflict could trigger widespread closures.
- IEA Proposes Strategic Reserve Release
The International Energy Agency (IEA) proposed releasing the largest strategic oil reserves in history to curb global oil price spikes resulting from the Middle East conflict. The proposal is said to exceed the release of 182 million barrels of oil by member nations in 2022 following Russia’s invasion of Ukraine.
The measure is being considered at an emergency meeting of IEA member nations, with a final decision expected shortly. The policy is expected to help stabilise global energy markets, which have been jolted by threats of oil supply disruptions from the Gulf region.
- Saudi Arabia Intercepts Drones Heading to Oil Fields
War tensions are also beginning to affect energy facilities in the region. Saudi Arabia’s Defence Ministry stated it intercepted two drones heading towards the Shaybah oil field in the country’s south-east.
“Two drones heading towards the Shaybah oil field were intercepted and destroyed,” the ministry said in a statement on social media platform X.
In a further report, Saudi authorities also claimed to have successfully intercepted five additional drones heading towards the same oil facility.
- G7 Discusses Economic Impact
G7 leaders are scheduled to hold a video conference to discuss the economic impact of the conflict, particularly regarding global energy market conditions.
France’s presidency stated that this meeting represents the first discussion among G7 nations on the economic impacts of the conflict. The Élysée Palace emphasised that economic coordination is key to ensuring an effective response to emerging disruptions.
- Strait of Hormuz Tensions
The situation in the Strait of Hormuz, a strategic shipping route for global oil trade, has also sparked confusion. The US Energy Secretary briefly stated that the US Navy was escorting oil tankers through the strait, but the statement was subsequently deleted.
The White House then clarified that there is no US Navy escort of oil tankers. On the other hand, Iran’s Revolutionary Guards stated there are no US warships approaching the strait, which they claim is effectively closed in retaliation for US-Israeli attacks.
US President Donald Trump also warned Iran against laying mines in the vital shipping lane.
- Global Stock Markets Fluctuate
Amid geopolitical uncertainty, global stock markets showed mixed reactions. The Paris and London exchanges each rose more than 1.5 per cent, whilst Frankfurt gained 2.4 per cent.
In Asia, the Seoul stock index surged more than 5 per cent and Tokyo rose 2.9 per cent. However, the US stock market, which initially strengthened early in trading, ultimately closed lower.