Assessing the global economic impact of the Middle East war in World Economy News 06/03/2026 Needless to say, the war in the Middle East is one of these fast-moving environments, and even the best geopolitical analysts are struggling to predict how it could end. For financial markets, the branching point is simple and more brutal: does this end in days, or does it become a forever war that involves an entire region? Crucial factors here are whether, how and when there could be a regime change in Iran; the duration and intensity of US involvement; and the length and severity of any disruption to traffic through the Strait of Hormuz. In shaping our view, we are working with a base case scenario that assumes roughly two weeks of ongoing combat, involving not only the US, Israel and Iran but the entire Middle East region. Air traffic will be down and the Strait of Hormuz will be basically blocked. After these two weeks, political instability in Iran will remain, but broader uncertainty will recede and the Strait of Hormuz will gradually reopen. Within four to six weeks, conditions could return close to the pre‑war environment, albeit with elevated levels of uncertainty. Given that there is no historical evidence of quick and smooth regime change in any country, the risk to our base case scenario is clearly to the downside. Think of ‘boots on the ground’, much longer-lasting military action or Iranian retaliation via activated sleeper cells or cyberattacks on US targets or even US territory. Global trade: A supply shock at the worst possible moment The Iran war is unfolding against a global trading system already strained by Trump’s tariff offensive and the lingering fragmentation of supply chains since Covid and the war in Ukraine. The Strait of Hormuz is the single most important chokepoint in global energy trade, and it now sits in an active warzone. Even without a formal blockade, the commercial consequences are already emerging: insurers are cancelling cover, shipping premiums are spiking, and vessels are re-routing or pausing transits. The knock-on effects extend well beyond energy. Gulf airspace closures are disrupting aviation corridors between Europe and Asia. Houthi reactivation in the Red Sea would close the alternative routing valve that kept goods moving during earlier episodes of Hormuz tension. The combination of higher energy costs, disrupted logistics, and a generalised confidence shock would constitute a meaningful drag on global trade volumes at precisely the moment the world economy was still digesting the inflationary and growth consequences of the tariff shock. The mother of all bad timings. How the current energy supply risks compare to 2022 For oil and gas markets, there will likely be some parallels made with 2022 and Russia’s invasion of Ukraine. The oil supply at risk from a successful blockade of the Strait of Hormuz is roughly 15-20% of global supply, depending on how much supply the Saudis can divert by pipeline to the Red Sea. This is significantly higher than the 7-8m b/d of Russian oil supply (which is around 7-8% of global supply) that was at risk during the early days of the Russia-Ukraine war, when we saw Brent spike to almost $140/bbl. However, helping to a certain degree at the moment is the fact that oil inventories are more comfortable than they were in the lead-up to Russia’s invasion of Ukraine. OECD stocks are in the region of 200m barrels higher now than prior to the Russia/Ukraine war. Still, a tw