The war which involves Iran, the United States and Israel is not merely a matter of economic concern in the Middle East any longer; it has now become a global distribution of costs. Nations that import large amounts of oil have to pay higher prices for fuel, freight and industrial inputs, while certain energy exporters are getting more money for each barrel they are able to get to market. The surprising thing is that even in the face of higher oil prices there have been few clean winners.
On September 16 Brent crude reached $105.83 per barrel and West Texas Intermediate $102.43, and shipping via the Strait of Hormuz continued to be very heavily restricted. On September 15 only four ships were spotted going through the Strait, as compared with an average of 18 over the previous 10 days. According to the International Energy Agency’s September Oil Market Report, global oil stocks have dropped by 507 million barrels since February, and the world’s oil supply is now anticipated to decrease by 5.7 million barrels per day in 2026. Reuters also reported the latest crude prices and restrictions affecting regional energy flows.
The Iran war is therefore more than just a spike in oil prices; it is altering the way purchasing power is distributed among countries, affecting trade balances, putting pressure on currencies, and forcing central banks to deal with inflation which they themselves have not caused.
Country snapshot so far:
- Iran: Negative. The effect of the war, the sanctions and the restrictions placed on oil exports has been to cause the domestic economy to contract.
- United States: Negative for consumers and a large number of businesses since gasoline, diesel, and inflation rise, though domestic refiners and producers may benefit from the higher margins.
- China: Negative energy shock, but this effect has been greatly reduced due to its inventories, domestic production, lower oil consumption and the use of alternative energy sources.
- India: Negative due to the high cost of imported crude oil, inflationary pressures and a weaker rupee, even though economic growth remains relatively strong.
- Japan: Negative through its import bill, with a trade deficit of ¥1.106 trillion in August due to the rise in oil prices.
- Germany: Negative due to higher energy costs, weaker household purchasing power, and a slower recovery.
- Saudi Arabia: Mixed. Although higher oil prices have brought in a substantial amount of revenue, lower export volumes and the attacks on energy infrastructure are increasingly posing a threat to that benefit.
The Oil Market’s Worst Nightmare Is the Strait of Hormuz →
The economic system starts with a single narrow water route; prior to the outbreak of war on February 28, approximately 20 million barrels per day of crude oil and petroleum products usually passed through the Strait of Hormuz, which amounted to about one-fifth of global oil consumption. The International Energy Agency refers to the present disruption as the greatest oil supply interruption in the history of the world market.
At first, the shock was taken in part by emergency stockpiles, lower demand, the use of alternative shipping routes and increased production outside the Gulf area. However, these buffers are now growing thinner. The IEA says that more than 10 million barrels per day of production from the Gulf had still been halted in August, and diesel and other refined products have become considerably more scarce than crude oil. According to the agency, U.S. diesel prices in early September were almost twice what they had been before the war.
The global economy has still managed to avoid a wide-scale collapse. In its July update of the World Economic Outlook, the International Monetary Fund forecast global growth at 3.0% in 2026 and 3.4% in 2027, although it emphasized that the effects are very uneven. Those countries which import energy are taking the greatest direct blow from the terms-of-trade shock while the economies taking part in the technology boom have been able to offset part of the damage.
The United States shows what happens when a nation manages to produce huge amounts of oil yet still experiences the effects of a price shock. According to the most recent fuel figures from the U.S. Energy Information Administration, regular gasoline averaged $4.319 per gallon on September 14, and on-highway diesel reached $6.285 per gallon. Diesel is particularly significant since it is used to operate trucks, agricultural equipment and industrial machinery, which means that the impact of the shock extends well beyond the gas station.
The Federal Reserve had previously stated that PCE inflation reached 4.1% over the 12 months ending in May, an increase from 2.5% the previous year, partly due to the Middle East energy shock. This situation presents a difficult dilemma since households see their purchasing power decline while at the same time policymakers are under pressure to maintain tight monetary conditions.
How Soaring Fuel Costs Turned IndiGo’s Revenue Growth into a Loss →
Asia has to shoulder a large share of the financial burden since a great deal of oil from the Gulf in the past has been directed towards the east. The International Energy Agency states that, in 2025, China and India together accounted for about 44% of the crude oil exports going through Hormuz. Although China has coped with the situation better than a simple assessment based on its import dependence would indicate, crude imports in China dropped by 14.6% during the first eight months of 2026 and the shortfall was lessened by the level of its inventories, its domestic energy production and the increasing renewable capacity. Yet, the National Bureau of Statistics of China noted that higher international crude and commodity prices were being passed directly on to Chinese producer prices in August.
The International Monetary Fund is currently expecting Chinese growth to be 4.6% in 2026, higher oil prices being one of the obstacles. Although this represents a financial loss in comparison to a world in which imported energy had remained cheaper, it has not led to a full-blown economic crisis since China has been able to cut down demand and diversify its sources of supply.
India is facing a more immediate currency problem. In the early part of this year the Indian Ministry of Finance stated that the country imported approximately 88.6% of the crude oil it needed, which means that higher global oil prices have a significant impact on inflation and the value of the rupee. On September 16 the rupee was trading at nearly 95.96 against the U.S. dollar, which was about a six-week low, high oil prices being given as one reason for the pressure. Nevertheless the IMF cut its 2026 growth forecast for India by just 0.1 percentage point to 6.4%, indicating that the wider economy has stayed resilient in the face of the energy shock.
Japan is probably the best example of a war showing up in the trade figures of a major economy. Reuters reported that Japanese imports rose by 28% on an annual basis in August, representing their biggest increase in almost four years, because the value of crude oil imports went up by 58.7%. Despite its strong exports, Japan had a trade deficit of ¥1.106 trillion.
Europe is facing the same issue with regard to oil and natural gas. The German Bundesbank has stated that the Middle East energy shock is slowing down the country’s recovery, decreasing household purchasing power and increasing costs for companies which are already encountering supply bottlenecks. Although fiscal spending has managed to alleviate some of this pressure, it is unable to get rid of the basic cost of imported energy.
How Saudia Arabia is Doing Financially with the War →
Saudi Arabia illustrates the reason it is misleading to describe oil-exporting countries as simple winners. In July the International Monetary Fund stated that the higher crude prices were more than offsetting the effect of Saudi Arabia’s reduced export volumes and thus resulted in an oil-revenue windfall. The country has also been able to make use of infrastructure which allows it to go around Hormuz, such as its pipeline running from east to west towards the Red Sea. Nevertheless, the IMF had projected growth of just 1.7% for 2026, the reason being weaker trade, lower oil shipments and pressure on non-oil activities.
The cushion has been less secure in September since attacks on Saudi energy infrastructure disrupted the East-West route and as a result crude oil from Saudi Arabia had to be sent via alternative arrangements through the Sohar port in Oman. Although higher prices still benefit each barrel that gets to the buyers, the inability to reliably move the barrels can quickly nullify part of that benefit. Reuters reported on the disruption and the resulting pressure on Saudi supply routes.
Iran is at the other end of the equation. According to the IMF’s July forecast, the Iranian economy would shrink by 5.4% in 2026, although the estimate had been improved from that in April since some oil exports had done better than expected at the beginning of the conflict. Since then, ongoing fighting, sanctions and restrictions on energy trade have still continued to put pressure on Iran’s access to foreign currency and imported goods.
That is the reason why the financial picture of the Iran conflict is more complex than the idea that ‘oil exporting countries win and oil importing ones lose’. It is true that the importing countries are clearly having to pay a higher energy bill, but producers located within the conflict area are suffering losses in terms of production, infrastructure or shipping capacity. At the same time, countries outside the region which have reliable oil and gas exports are able to benefit from higher prices without themselves experiencing the same level of physical damage.
The most significant figure at the moment might not be the daily price of Brent crude; it could be the 507 million barrels which have already been taken out of global inventories since February. The existing stocks enabled the world to delay some of the economic impact. However, as these buffers shrink, each new disturbance has the possibility of spreading more rapidly from Hormuz through to currencies, inflation, interest rates, corporate margins and household budgets. The IEA’s September Oil Market Report provides the underlying inventory and supply data.
The war in Iran has therefore resulted in the establishment of a form of global energy tax, although this tax is distributed in a highly uneven manner. The United States experiences it at the diesel pump, India feels it in its currency, Japan in its trade deficit, Germany in its industrial and domestic energy costs, China through the imported inputs it uses, Saudi Arabia as a result of a combination of higher prices and damage to its export capacity, and Iran bears the direct economic cost of the conflict.
The more long the Strait of Hormuz stays restricted, the less it appears to be just a temporary oil shock and the more it tends to involve a reorganisation of who pays, who earns and who can bear the cost.