TEHRAN- As tensions escalate between the US-Israeli alliance and Iran, economists are warning of a seismic shock to the global economy.

A full-scale military confrontation would not remain confined to the Persian Gulf. Instead, it would trigger a cascade of supply shocks—starting with a sharp spike in oil and gas prices—that could plunge the world into a prolonged period of stagflation.

The core threat is “imported inflation.” Unlike demand-driven price rises, this phenomenon occurs when external factors—soaring energy costs, disrupted shipping routes, and skyrocketing insurance premiums—push up prices regardless of domestic monetary policy. 

With the Strait of Hormuz, a chokepoint for nearly 20% of global oil supply, potentially becoming a conflict zone, analysts forecast crude oil prices could exceed $150–$200 per barrel. Natural gas prices would follow suit, crippling industrial production in Europe and Asia.

The Strait of Hormuz, a 21-mile-wide waterway between Oman and Iran, is the world's most critical oil chokepoint. Nearly 20% of global petroleum passes through it daily—about 17 million barrels. Iran has repeatedly threatened to block the strait in response to military strikes.

Under this scenario, central banks face an impossible dilemma.

Raising interest rates—their standard anti-inflation weapon—would do nothing to lower energy prices or fix broken supply chains. Instead, higher borrowing costs would choke off investment, increase unemployment, and accelerate a slide into recession.

The result is a textbook case of stagflation: rising prices alongside stagnant growth, a combination that defeated policymakers in the 1970s.

The damage would not stop at goods inflation. Financial markets would see a flight to safety, hammering equities and corporate bonds. 

Banks holding energy-sector debt could face cascading defaults. Global trade volumes would shrink as shipping costs multiply, further isolating economies already fractured by geopolitical rivalries. 

Developing nations, heavily reliant on imported energy and food, would face the most severe hardships, potentially triggering debt crises and social unrest.

In short, a US-Israeli war with Iran is not merely a regional military conflict—it is an express ticket to global economic turmoil. 

Policymakers in Washington and Tel Aviv must weigh any military calculus against this grim economic reality: higher inflation, lower growth, broken financial systems, and a world left poorer and more unstable. 

The lesson from history is clear—in an interconnected global economy, war always comes with a bill, and everyone ends up paying.