How escalation in Middle East spills over, impacts global economy
The ongoing conflict in the Middle East has led to a systemic economic shock, affecting energy markets, industrial supply chains, and maritime routes. The crisis has driven up oil and gas prices worldwide, with global benchmark Brent crude settling at $112.78 a barrel, and is testing the resilience of the global economic recovery.
The conflict in the Middle East has entered its fifth week with no clear resolution. Iran has restricted navigation through the Strait of Hormuz, driving up oil and gas prices worldwide. US West Texas Intermediate crude has settled above $100 for the first time since July 2022. The blockade has affected global energy markets, industrial supply chains, and maritime routes. The International Energy Agency is in talks to release more stockpiled oil to comfort the markets. The crisis has also rattled global equity markets, with major US indices dropping over 7% and the pan-European STOXX 600 index sliding over 8%. The WTO has warned that sustained high energy prices could reduce the 2026 global GDP forecast by 0.3 percentage points.
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