The US and Israel launched coordinated airstrikes on Iranian nuclear facilities on March 5, 2026. Twenty-six days later, the conflict has not ended — it has escalated. This is no longer a surgical strike story. It is a war that is reshaping the global economy in real time.
Here is what the data shows about what happens to inflation when a war breaks out in the world's most important oil corridor.
Why This War Is Different From Ukraine
The Russia-Ukraine war was terrible. But it was geographically contained. Its energy disruption mainly hit Europe, via gas pipelines. Asia and the Americas were affected but indirectly.
The Iran war is different in two critical ways. First, it involves the Strait of Hormuz — a 33km-wide channel through which 20% of the world's oil flows every day. Ukraine had no chokepoint like this. Second, Iran has explicitly threatened to close Hormuz if attacks continue. That is not a bluff — they have closed it before.
If Hormuz closes even for two weeks, IEA models suggest oil would spike to $140-180 per barrel. At $150 oil, global inflation would jump an estimated 2-3 percentage points within three months. Every country in the world would feel it.
The Countries Most at Risk
Not all countries are equally exposed. The pain concentrates in nations that import large amounts of oil from Gulf producers and have limited strategic reserves.
Most exposed: Asia
Japan, South Korea, India, and the Philippines collectively import more than 60% of their oil from Gulf states — and most of it travels through Hormuz. The Philippines declared a national energy emergency on March 20. Australia followed. Japan released strategic reserves on March 22 for the first time since 2022.
Somewhat insulated: United States and Europe
The US is now a net oil exporter and can partly shield its domestic market. Europe has diversified its energy supply since 2022 and has substantial LNG infrastructure. They will feel higher prices but have more cushion.
Severely exposed: Global South
Egypt, Pakistan, Sri Lanka, and most of sub-Saharan Africa have no strategic reserves and limited foreign exchange buffers. For these countries, a sustained oil price spike above $120 risks debt crises, currency collapses, and food inflation cascades.
What History Says About Wars Near Chokepoints
The 1973 Arab oil embargo is the closest historical parallel. OPEC cut production and embargoed Western nations. Oil quadrupled in price. Global inflation surged. The US entered a recession. Stagflation defined the decade.
In 1973, oil was 7% of global GDP. Today it is closer to 3% — economies are more efficient. But global supply chains are also far more interconnected. The transmission speed of an oil shock is faster today than in 1973, not slower.
The Inflation Timeline
Based on historical patterns from similar events, here is what typically happens:
- Week 1-4: Oil futures spike. Equity markets fall. Gold rises. Shipping costs increase.
- Month 1-3: Petrol prices hit consumers. Transport costs rise. Food prices begin to increase.
- Month 3-6: Manufactured goods inflation. Services inflation. Central banks face a dilemma: raise rates to fight inflation or cut to support growth.
- Month 6+: Depending on duration, either a sharp recession or a prolonged stagflation period.
We are currently in weeks 3-4 of this timeline. The cascade is just beginning.