The Iran war, now in its tenth week, has sent significant shockwaves across the global economy, with major signs of slowdown emerging in multiple parts of the world. Rising energy costs are fueling inflation, straining production, and raising fears of a recession. This fallout is reshaping the global economy from energy markets to everyday prices.
In South Asia, a region heavily reliant on energy and fertilizer imports from the Gulf, the war is hitting hard, with some places and people experiencing the impacts more acutely than others. Consider K.S. Pradeep, who repairs tuk-tuks on a street in Colombo, the capital of Sri Lanka. Sri Lanka, an island nation of 22 million, began rationing fuel after the war began, as it imports two-thirds of its supply. Prices also rose, which pushed up the price of transport, cooking gas, medicines, and food.
Pradeep is working on a holiday to catch stray customers because his business has halved since the war began. He is only repairing two tuk-tuks a day and is only taking home about $10 a day. He says drivers have to choose between fixing their vehicles or buying food. "Everything's more expensive, starting from a cup of tea," Pradeep says. His own family cooks less to save cooking gas and eats cheaper food like watery curries. This is a coping strategy Pradeep is deploying just weeks into the crisis, and there are likely millions like him. The World Food Organization says that even before this crisis, some 20% of Sri Lankans were food insecure.
Alongside the fuel shortages, there are fertilizer shortages because Sri Lanka used to import most of its needs from the Gulf. Farmers in Sri Lanka say that without fertilizer, they are planting less, including less rice, which is the main source of food there. Less yields could mean higher prices. And if the war continues, those fertilizer shortages will hit more upcoming planting seasons and may well ignite a South Asian hunger crisis.
In Mexico, the government has been trying to swim against the tide, pulling out all the stops to keep prices from going up. Fuel is being subsidized, and perhaps more importantly, the government has capped the price of tortillas at $1.22 a kilo. But for Mexicans at the market, it's not enough. Francisco Javier Gutierrez-Fiallo says, "Everything feels like it's out of control." He notes, "The price of chicken suddenly spikes. The price of eggs goes up." He expresses, "I just feel like there's more instability than before."
Indeed, Mexico has struggled to control inflation. The price of tomatoes, for example, has jumped more than 100% compared to last year. Some chiles have jumped more than 50%. Gutierrez-Fiallo says everything is so expensive that he has stopped eating meat, and he just doesn't understand it. "I thought we were an oil-producing nation," he says. "It's not supposed to affect us."
The only thing that has remained stable is the tortilla, and that's because of the government cap. Juan Javier Cuevas, who owns a tortilla shop, says corn keeps getting more expensive because fertilizer has become more expensive. He is almost at break-even and doesn't know how much longer he will be able to respect Mexico's price cap. "The United States is to blame," he says, "for provoking a senseless war." He adds, "And now, those of us who have nothing to do with it are having to pay the cost."
In London, airlines are hiking ticket prices and canceling flights ahead of summer vacations. Fatih Birol, the head of the International Energy Agency, predicts that in Europe, there might only be about six weeks or so of jet fuel left. Supply concerns mean oil and gas companies are raking in record profits. This week, BP said its quarterly earnings more than doubled, a situation not seen since Russia's full-scale invasion of Ukraine, while people face shock heating and fuel costs.
In Ireland, angry truckers and farmers have blocked highways and the country's sole oil refinery in protest. The government there only narrowly survived a no-confidence vote as it scrambled to boost fuel subsidies by nearly $1 billion. Germany is lowering fuel taxes, and Britain is easing emissions standards. But across Europe, growing anger threatens to topple governments.
British Prime Minister Keir Starmer is trying to lower expectations of relief anytime soon. He stated, "I have to level with you about Iran because the truth is, the economic consequences could still be with us for some time." The president of the European Commission says this crisis could last months or years. The International Monetary Fund says Britain will take the biggest hit of any major economy because of its exposure to natural gas prices. The country's Food and Drink Federation forecasts that food price inflation could triple by the end of this year.
Energy and transport costs affect medicines as well. Mark Samuels, CEO of Medicines UK, an industry group, spoke to the BBC and warned, "In a matter of weeks, we'll either see price rises or shortages." Amid this uncertainty, Starmer has lamented how events thousands of miles away in Iran are hitting his political fortunes. His center-left Labour Party is bracing for losses in next week's local and regional elections. Anti-establishment parties are gaining steam, especially on the far right.
In Lagos, Nigeria, the fallout from the escalating conflict in Iran is already being felt. While Nigeria is a major oil producer, the benefits are not as straightforward as they might seem. Higher crude prices should boost government revenues, but Nigeria still imports much of its refined fuel, meaning that, like elsewhere, consumers here are facing rising petrol prices at the pump. Across Lagos and other major cities, commuters are paying more just to get to work, and the frustration for people like businesswoman Mary Douglas is clear.
Douglas explained how the situation has affected her so badly that she doesn't go out with her car anymore most times. She recounted being shocked when the fuel price increased again while she was on her way to church with only 13,000 naira on her. Food prices are following suit. Traders say the cost of moving goods has surged in just weeks. Economists say the situation exposes a long-standing vulnerability: Nigeria's reliance on imported fuel despite its oil wealth.
Even with the new Dangote refinery in Lagos, Nigeria's first and Africa's largest, which was meant to cut reliance on imports, that hasn't yet led to cheaper fuel for consumers. Transport costs are also climbing. It's something realtor Adeleke Babatunde says he simply cannot understand. "We have crude in Nigeria, so that should not even affect us at all, because we have the crude, and we have the refinery," he said. "So why are we now suffering for other people's problem?"
And the ripple effects don't stop there. The weakened naira, rising inflation, and higher import costs are tightening the squeeze on households. Essential goods, from food to medicines, are becoming less affordable. For many Nigerians, this distant conflict has now become a daily economic reality.
