Global Economy Faces Widening Strains as Mideast War Intensifies

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According to a Bloomberg Economics analysis, the biggest global economic headwinds come from energy markets, with about a fifth of global oil and LNG supplies passing through Hormuz. Asian countries like China, India, Korea, and Japan are top buyers of Gulf oil.

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By region, the fallout will be uneven. At Capital Economics, chief economist Neil Shearing said Asia, the euro area and the UK are more exposed than the US. Oxford Economics on Friday trimmed its UK economic growth forecast for 2026, saying the Iran conflict will push up inflation and household energy bills.

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Officials from the European Central Bank indicated they’re staying vigilant in case of any inflationary flareups, and executives with operations to the region aren’t hitting the panic button yet.

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“We see a world which is really under stress — that’s clear,” said Stefan Hartung, the chief executive officer of Robert Bosch GmbH, world’s biggest auto-parts maker.

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But the difficulties might be short-lived and many companies boosted resilience since the pandemic. Facing less transport capacity, “you need to be more like in the Covid times,” Hartung said in an interview, downplaying the possibility of widespread industry shortages. “I suspect that for the long term, we’ll see a stabilization coming,” he said.

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Fertilizer, Cement

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Donald Trump’s administration is trying to relieve the energy supply crunch that’s helped push US retail gasoline prices to the highest level at any time under his terms as president. On Thursday, it cleared the way for India to temporarily increase its purchases of Russian oil, a policy reversal that reflects the concern about the energy fallout.

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But the global economy’s worries extend past oil, natural gas, jet fuel and gasoline.

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Bloomberg Economics estimates that almost 7% of global fertilizer exports, close to 6% of precious metals, 5.3% of aluminum and aluminum products and 4.4% of cement and other non-metallic minerals were shipped out of Persian Gulf ports “and are at risk of disruption.”

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“This is a significant event — not just in the Middle East, but for supply chains and for the world,” Jan Rindbo, CEO with Danish shipping company D/S Norden A/S, one of the world’s largest transporters of raw materials. 

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A Norden-chartered vessel that just offloaded grain in Saudi Arabia was about the leave the Gulf last Saturday when an Iranian order was broadcast for crews to turn around. 

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“The longer this conflict continues, the greater the concern about what it means for the world,” Rindbo said in an interview. “We’re seeing people take a step back. It may be that they’re not buying quite as many raw materials as they otherwise would, as they wait to see how the situation develops.”

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Shipping through the region will soon come with a higher premium. German tire maker Continental AG on highlighted the risks on Wednesday, warning that the conflict may affect sales and earnings by driving up costs and disrupting its operations.

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“We are very early in this situation,” Chief Executive Officer Christian Kötz said. But the war has already created “more uncertainty.”

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In the short run, air cargo rates could double or triple on flights transiting the Middle East hubs, said Niall van de Wouw, chief airfreight officer with Xeneta, an Oslo-based digital freight platform. With freighters parked, as much as 18% of the world’s capacity disappeared this week.

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Tourism and business travel is suffered. London’s Heathrow Airport, the busiest in Europe, saw 300 flights scrapped since the conflict broke out, with more disruptions expected, Chief Executive Officer Thomas Woldbye said. He declined to say how much the disruption was costing per day.