War in iran sparks global economic crisis

The recent escalation in the Iran war, marked by attacks on gas fields in the Persian Gulf, has triggered a global economiccrisis that could last for years. By striking critical energy infrastructure, Israel and Iran have unleashed a chain reaction that will disproportionately affect the world's poorest nations.

Energy shock and inflation

The destruction of upstream energy production facilities will lead to a shortage of supply, driving up prices and fueling inflation worldwide. Even if a cease-fire is reached, it may take up to five years to rebuild the damaged infrastructure. If the conflict continues, the consequences will be even more dire.

This energy shock, coupled with the broader disruptions caused by the U.S.-Israeli campaign against Iran, has all but guaranteed a global inflationary crisis. As demand for limited resources exceeds supply, prices will skyrocket, squeezing household budgets and businesses alike.

Debt crisis looms large

The impact of rising energy costs will be felt most acutely in low-income countries already grappling with unsustainable debt burdens. These nations, many of which borrowed in U.S. dollars or yuan from foreign lenders, will now face the dual challenge of repaying their debts at higher interest rates and purchasing essential fuels at exorbitant prices.

The World Bank estimates that the share of countries in debt distress has more than doubled in recent years, from 24% in 2013 to 54% in 2024. As the global economy struggles to absorb the shocks of this conflict, the burden of this debt crisis will fall hardest on the world's most vulnerable populations.