The conflict between the U.S. and Israel against Iran, which began on Feb. 28, initially triggered significant market volatility and concerns about severe economic disruption. However, the global economy has demonstrated greater resilience than many had predicted, with stock markets staging a notable recovery since their March lows. Financial markets have rebounded substantially following the initial shock of military operations. The Dow Jones has gained nearly 19%, the S&P 500 has risen almost 22%, and the Nasdaq has surged 27% from their March bottoms. The International Monetary Fund noted that the economy is being pulled in opposite directions—the war constraining growth while artificial intelligence enthusiasm provides offsetting momentum.
The conflict’s most tangible impact has been on energy markets and transportation costs. Brent crude oil prices climbed from approximately $72 per barrel before the war to nearly $120, though they have since moderated to around 20% above prewar levels. Reduced tanker movement through the Strait of Hormuz has created supply concerns. Airlines have responded by raising ticket prices, introducing fuel surcharges, and reducing flight capacity, with some carriers like Lufthansa Group cutting 20,000 short-haul flights and budget operator Spirit Airlines ceasing operations.
The elevated energy costs have created divergent outcomes across the global economy. They have accelerated demand for electric vehicles, with some regions experiencing triple-digit growth rates. Governments in Southeast Asia and Africa have announced clean energy initiatives and renewable investments in response. Conversely, the war has strained fertilizer supplies, with prices peaking 44% above prewar levels according to World Bank data. This has prompted some farmers to reduce fertilizer applications, raising concerns about future agricultural productivity and global food security, with the UN World Food Programme warning of potential hunger for tens of millions.
The economic impacts have been distributed unevenly across populations. Wealthier segments have absorbed higher costs with relative ease, while lower-income populations face meaningful pressure from increased expenses for fuel, food, and transportation. Military contractors and defense-related businesses have experienced profitability gains from the conflict.
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