War with Iran shocks energy and fertilizer markets, raising food security and inflation risks
Missile strikes that observers say have effectively closed the Strait of Hormuz have driven oil toward $120 then to about $90, pushed U.S. pump prices higher, disrupted fertilizer flows and threaten food supplies and inflation control, with low‑income countries and energy importers most exposed.
Observers say U.S. and Israeli missile strikes on Feb. 28 that killed Iranian leader Ayatollah Ali Khamenei have effectively shut the Strait of Hormuz, a chokepoint through which about a fifth of the world’s oil normally passes.
The immediate market reaction included oil prices jumping from under $70 a barrel on Feb. 27 to a peak near $120 before settling closer to $90, and U.S. gasoline averages rising to about $3.48 per gallon from just under $3 a week earlier, according to AAA.
The shutdown of Hormuz threatens both energy and agricultural input supplies. The IMF notes roughly 20 million barrels per day flow through Hormuz, and up to 30% of world fertilizer exports transit the route, creating a direct link from the conflict to higher fertilizer costs and potential increases in food prices.
The IMF warned that a sustained 10% rise in oil prices could add 0.4 percentage points to global inflation and reduce global output by as much as 0.2%. Economists cited in reporting stressed there is little spare global capacity to replace Hormuz throughput, heightening the risk that prolonged disruption would amplify price pressures.
Governments have already taken country-specific measures to reduce immediate household impacts and economic disruption: India prioritized household gas supplies; Thailand suspended overseas civil servant travel and urged using stairs over elevators; the Philippines introduced a four-day work week for some agencies; and Vietnam encouraged work-from-home arrangements.
The inflationary shock presents a policy dilemma for central banks. Higher energy prices fuel inflation but also risk slowing economic activity. The Federal Reserve and other central banks face trade-offs over rate moves while inflation remains above many targets and uncertainties about the conflict persist.
Economists and institutions offered differing assessments of duration and severity. Some noted past shocks (for example the Russia-Ukraine conflict and tariffs in 2025) showed economic resilience, while others emphasized the uncertainty over U.S. objectives and the potential for sustained higher prices to complicate inflation control and delay rate cuts.
The distributional effects are uneven: energy-importing countries in Europe and Asia—including South Korea, Taiwan, Japan, India and China—stand to face larger price increases, while oil-producing countries outside the conflict zone such as Norway, Russia and Canada could benefit from higher prices. Low-income countries with large agricultural sectors may be most exposed to fertilizer shortages and food shortages.
In the United States, being a net energy exporter may produce some macroeconomic gains from higher commodity prices, but households are likely to feel higher pump prices. Reporting cited estimates of roughly $2,500 in annual gasoline costs per household (about $50 weekly) and a hypothetical additional $10 weekly if oil averaged around $100 a barrel.
Analysts said if oil prices were to fall back toward the $70–$80 range the shock could be absorbed with less disruption, but they stressed the outcome depends on the length of the conflict and the degree to which shipping and export routes remain affected.