The war with Iran, which began with joint US and Israeli attacks on Iran in late February, is profoundly shaking the global economy. The de facto closure of the Strait of Hormuz by Iran has disrupted approximately 20% of the world's oil and LNG supply. Brent crude oil surged from pre-war levels of $72 to the $100-120 range and is currently trading around $100-106. This energy shock has hit Asian economies, which are heavily dependent on oil imports, the hardest, triggering a risk of stagflation. Foreign investors withdrew a net $52 billion from Asian excluding China stocks in March; this was the largest monthly outflow since 2008 and surpassed records set during Covid and the Ukraine war.

⛽ Oil and Energy Crisis
The most direct impact of the war has been the explosion in energy prices. Brent oil has increased by up to 50% due to the halt of oil and LNG shipments through the Strait of Hormuz. Asian countries (excluding China) are heavily reliant on energy from the Middle East, leading to rapidly rising import bills in economies such as Taiwan, South Korea, India, and Japan. In Europe, LNG prices have increased by 50% and are expected to remain high until 2027. This has the potential to push global inflation up by 0.8 percentage points, narrowing the room for central banks to cut interest rates.

👀 Record Capital Outflow from Asian Markets
Foreign investors lost risk appetite and exited Asia at a record pace. In March:
- Taiwan: $25 billion (the largest outflow in 18 years)
- South Korea: $13.5 billion
- India: $10 billion

A total of $52 billion in sales negatively impacted emerging markets outside of Asia as well. The Nikkei 225 experienced daily declines of up to 11%, and the Kospi up to 12%, triggering circuit breakers. Technology-heavy stock markets remained under stagflationary pressure due to rising oil costs. Analysts are describing this move as the "widest risk-off" ever.
🕵️ Global Growth and Inflation Risks
As the war drags on, global growth forecasts are being revised downwards. Experts say:
- In the short-term scenario (if the conflict eases within 1-2 months), oil will fall to the $75-90 range and growth will take a slight hit.
- In the long-term scenario (more than 3 months), oil will remain in the $100-150 range; Asia and Europe will face recession risks while growth in the US will slow.

Currencies in emerging markets are depreciating against the dollar. Gold has risen as a safe haven, but bond yields have also increased. Airline stocks have fallen by 5-6%, while defense and energy companies have seen partial support.

🤔 Regional and Sectoral Implications
In Asia, governments have closed schools to conserve fuel, called on employees to work from home, and taken measures against rising food and transportation prices. Thailand's rice exports and India's banana and rice exports to the Middle East have stalled; farmers are selling at a loss in local markets. Transportation costs have risen, and insurance premiums have skyrocketed. As the energy crisis deepens in Europe, food inflation and monetary policy pressures intensify in developing countries.

The Iran conflict has created a global energy crisis that hit Asia hardest, following the oil shock. A record $52 billion in capital outflows, stock market crashes, and inflationary pressures marked the first quarter of 2026. Despite Trump's ceasefire efforts, the situation in the Strait of Hormuz remains uncertain. Markets could recover if the conflict is resolved quickly; however, a prolonged conflict makes an Asian recession and global stagflation seem inevitable. Economists emphasize that the worst-case scenario is currently priced in, but the risks remain high.
#FedRateHikeExpectationsResurface
#USIranClashOverCeasefireTalks
#CreatorLeaderboard