War, the Strait of Hormuz, and the Shock That Brought the Global Economy to Its Knees
WANA (Apr 25) – When, on February 28, 2026, a U.S.–Israeli military confrontation against Iran began and the Strait of Hormuz was effectively taken out of circulation, it was no longer just a geopolitical flare-up—the world entered a phase in which “energy exists, but it no longer reaches the consumer.”
But the issue goes even further.
This is not merely a supply crisis; it marks the beginning of a forced retreat on the scale of the global economy.
The Strait of Hormuz—a chokepoint through which roughly one-fifth of the world’s oil passes—has now become ground zero of the crisis. In previous shocks, prices surged because markets were afraid. This time, however, it is not fear—it is the absence of flow. Between 7 to 10 million barrels of oil per day have been removed from circulation—not because they do not exist, but because they cannot reach their destination.
This is where a decisive shift occurs:
- The market is no longer regulated by “price,” but redefined by “scarcity.”
- The effects of this disruption quickly became visible—at the pump.
Between February 23 and April 13, 2026, gasoline prices in several countries experienced unprecedented spikes. Myanmar saw a 101% increase, the Philippines 72.6%, and Malaysia 68.1%, placing Southeast Asia at the epicenter of fuel inflation.
But this was only the beginning. In the United States, gasoline prices rose by more than 35%; in Canada, nearly 29%; and across Europe—from Sweden to the United Kingdom—double-digit increases were recorded. At the same time, diesel prices surged in major economies, sending a clearer signal: the crisis was no longer confined to fuel—it was spreading across the entire economy.
What is less visible, however, is the deeper layer of this crisis. According to economists such as Paul Krugman, the core issue is not the “price of oil,” but the physics of supply. When 20% of the world’s real oil flow is disrupted, price alone can no longer rebalance the market.
Under such conditions, a quiet but critical process begins:
- Economies start to retreat.
- Companies cut production because they lack sufficient energy.
- Transportation becomes constrained.
- Investments are put on hold.
- And ultimately, demand declines—not by choice, but by necessity.
This is what Krugman refers to as “demand destruction.”
At this point, the 2026 crisis moves beyond a price shock and becomes a chain reaction of economic erosion.
Rising electricity prices in the United States, increasing industrial production costs, and higher prices for fertilizers and urea all signal the next wave: food inflation. This means the crisis is no longer confined to energy markets—it has entered everyday life.
More importantly, this process is not quickly reversible.
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Even if the Strait of Hormuz were to reopen tomorrow, the global economy would not simply return to its previous state. Why?
Because the chains have been damaged:
- Contracts have been canceled,
- production lines have been halted,
- and many businesses have disappeared in the meantime.
Rebuilding this network will take time—not days, but months, perhaps even years.
Meanwhile, a striking paradox has emerged.
Prices have soared, yet some oil producers—particularly in the Persian Gulf—are facing severe revenue losses due to export disruptions, in some cases up to 85%. In other words, this crisis is simultaneously squeezing both consumers and producers.
Time has now become the most critical variable. Each day that the Strait of Hormuz remains closed pushes the world one step closer to a familiar yet dangerous scenario: stagflation—a combination of low growth and high inflation.
Members of the Iranian Army take part in an annual drill in the coastal area of the Gulf of Oman and near the Strait of Hormuz, Iran, in this picture obtained on December 30, 2022. Iranian Army/WANA (West Asia News Agency)
In such a situation, traditional economic tools lose their effectiveness:
- Raising interest rates deepens the recession,
- while lowering them fuels uncontrollable inflation.
Three factors could mitigate the severity of this crisis:
- An end to military tensions,
- forced reductions in consumption,
- and a faster transition toward alternative energy.
Yet even in the best-case scenario, one reality remains unchanged: What has begun is not merely an energy crisis. It is a forced contraction of the global economy.
The war that began against Iran has now, in an invisible but very real way, spread into the daily lives of billions—not only through rising costs, but through the shrinking boundaries of economic life itself.
