Kuala Lumpur — A potential war involving Iran could trigger major disruptions in the global economy, primarily through rising energy prices, inflation pressures, and instability in financial markets, according to a new analysis by Chatham House.
The report warns that one of the biggest risks lies in the strategic importance of the Strait of Hormuz, a narrow maritime corridor that carries nearly one-fifth of the world’s oil supply. Any military escalation in the region could disrupt shipping traffic and send global energy prices sharply higher.
Economists say that a sudden spike in oil prices would likely ripple through the global economy. Higher fuel costs would push up transportation expenses, manufacturing costs, and food prices, potentially fueling a new wave of global inflation.
Energy markets remain particularly sensitive to tensions in the Persian Gulf, where several of the world’s largest oil producers operate. If a conflict spreads beyond Iran, it could create broader supply shocks that affect both oil and natural gas markets worldwide.
The analysis also suggests that prolonged instability in the region could weaken investor confidence. Businesses may delay investments, global markets could become volatile, and tourism in the Middle East could decline significantly.
However, researchers believe the economic damage would likely be concentrated in a few countries rather than the entire global economy. Iran itself would face the most severe consequences, with analysts estimating that its gross domestic product could shrink significantly if a full-scale war and expanded sanctions occur simultaneously.
Despite these risks, the report notes that the global economy may prove resilient unless the conflict escalates into a wider regional war involving multiple major energy producers.
Still, experts warn that markets remain highly sensitive to geopolitical tensions, and even limited disruptions in oil supply could have immediate consequences for inflation and global economic stability.
