Surging oil prices caused by the ongoing Iran conflict are triggering widespread economic strain, threatening a global slowdown as businesses from the U.S. to India struggle with rising costs.
In California, Kevin Kelly, owner of Emerald Packaging, faces skyrocketing plastic resin prices, which have nearly doubled from 45 cents to 85 cents per pound in weeks. The sharp increase has forced him to consider invoking force majeure on contracts his company cannot afford to fulfill.
Thousands of miles away in India, gas shortages have forced dozens of aluminum extrusion plants to close, disrupting exports. In the U.K., farmers are rationing fertilizer stocks amid soaring prices, highlighting the ripple effects on food production.
Oil Supply Shock
The war in Iran’s sixth week has disrupted nearly 20% of global oil supplies due to Tehran limiting shipments through the Strait of Hormuz. Brent crude has remained above $100 per barrel for over three weeks, rising more than 50% from pre-war levels of about $70. Experts warn that prices above $110–$120 per barrel could sharply escalate recession risks.
Citi’s Nathan Sheets, a former U.S. Treasury official, said: “As this shock gets bigger, the risks of recession rise significantly…certain economic activities may no longer be justifiable, leading to a sharper pullback.”
Even with a swift resolution, damage to Gulf refineries, ports, and storage facilities means higher prices could persist for months. Analysts predict oil could remain between $100–$190 per barrel for the year if supply disruptions continue.
Uneven Impact Across Regions
Europe and parts of Asia are particularly exposed. In the U.K., the OECD has lowered its 2026 growth forecast to 0.7%, the steepest downgrade of any major economy. Indian aluminum exports are curtailed due to gas shortages, potentially driving global price increases for construction materials, solar panels, and consumer goods.
China and the U.S. are relatively better positioned. China’s lower dependence on Gulf oil and electrified infrastructure cushions the impact. The U.S., now a net energy exporter, faces rising costs for consumers but gains for domestic energy firms. Nonetheless, prolonged high oil prices could dampen spending in food service, travel, and lodging, with consumer growth projected to slow to around 1% this year.
Long-Term Consequences
Even if the conflict ends abruptly, supply chain disruptions in plastics, chemicals, and energy will continue affecting businesses globally for months. Kelly warned: “You could end the war tomorrow and the price increases will still continue…we’ve created huge problems that will play out over the next several months.”
Analysts emphasize that the duration of the Iran conflict is critical: the longer it persists, the greater the risk of a global economic slowdown or recession, as inflation and supply shortages ripple across multiple sectors.
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