Just over a week into the war involving the United States, Israel, and Iran, the global economy is already experiencing significant turbulence.
On March 9, the benchmark Brent and WTI crude oil prices surged past $100 per barrel, marking their first breach of this threshold since 2022. While prices dipped back below $95 later the same day, this initial spike was a stark indicator of market volatility.
To put this into perspective, just a day before hostilities erupted on February 27, both oil benchmarks were trading in the region of $70 per barrel.
This dramatic surge in energy prices was primarily triggered by a near halt in maritime traffic through the Strait of Hormuz, a critical chokepoint through which approximately 20% of the world’s oil and gas supplies transit.
While an increase in crude oil prices—and by extension, fuel costs—was anticipated given the conflict’s focus on Iran and the Strait of Hormuz, analysts are warning that its repercussions will extend far beyond the energy sector. They predict widespread ripple effects across various economic lines and numerous parts of the globe.
Here are three key impacts already being observed:
1. Food Production Threatened
The ongoing conflict is also severely impacting the global fertilizer sector. According to the Observatory of Economic Complexity, Oman, Qatar, Saudi Arabia, and the United Arab Emirates are recognized as four major exporters of nitrogen fertilizers.
These crucial fertilizers, derived from natural gas, are vital for food crops that account for approximately half of the world’s food supply. While most Gulf region fertilizer producers remain operational amidst the conflict, Qatar Energy, a prominent urea producer, was compelled to halt production after its gas supply was disrupted by Iranian drone and missile attacks last week.
Furthermore, fertilizer companies in the region are experiencing a decline in revenue due to their inability to export products through the closed Strait of Hormuz. This vital waterway handles one-third of the world’s fertilizer supply, as reported by Bloomberg. The situation is further complicated by Iran’s own significant role as a fertilizer exporter.
Adding to global concerns, China, the world’s largest exporter of nitrogen fertilizers, has announced a halt to phosphate fertilizer exports from late 2025 and will limit urea exports until August 2026, aiming to secure domestic supplies for its farmers.
This combination of factors has led to a sharp surge in fertilizer prices. At the Port of New Orleans, a primary entry point for fertilizer products into the United States, prices jumped from $516 per ton to $683 within just the first week of the war. This price hike comes at a particularly critical juncture, as farmers in the Northern Hemisphere are preparing to commence their planting season, significantly worsening the outlook for the agricultural industry.
Data from the American Farm Bureau Federation indicates that roughly 25% of U.S. fertilizer imports occur annually between March and April. “This really comes at the worst possible time,” Harry Ott, a cotton, corn, and soybean farmer from South Carolina, told the BBC.
Analysts caution that if the conflict persists, consumers could begin to feel the impact on food prices and potential shortages within one to three months. Without adequate fertilizer supplies, crop yields will inevitably decline, leading to both higher costs and reduced availability of essential foodstuffs.
Such a scenario carries the grave potential for widespread hunger, particularly in poorer nations and among the most vulnerable communities globally. The UN World Food Programme (WFP) underscored this risk in a statement:
“A sudden surge in food and fuel prices, triggered by the escalation of conflict in the Middle East, could create a domino effect, worsening hunger for vulnerable populations in the region and across many parts of the world.”
2. Global Medicine Distribution Hampered
The escalating conflict in the Middle East is now directly impacting the global supply chain for medicines and pharmaceutical products. The most significant repercussions stem from recent attacks on Dubai, a long-established primary logistics hub for the worldwide pharmaceutical sector.
Dubai, the most populous city in the United Arab Emirates, boasts one of the world’s busiest international airports, projected to handle approximately 95 million passengers by 2025. Crucially, this airport also serves as a vital cargo distribution center for pharmaceuticals, especially those requiring strict cold chain management to maintain their quality and efficacy.
Dubai’s role is particularly crucial for India’s pharmaceutical industry, which is renowned as the largest supplier of generic drugs globally and produces 60% of the world’s vaccines, according to data from India’s Department of Commerce. Emirates Airline further underscores this importance with its specialized Emirates SkyPharma facility, specifically designed to handle temperature-sensitive pharmaceutical shipments.
Beyond its airport, Dubai is home to Jebel Ali Port, recognized as the ninth busiest cargo port worldwide and the largest in the Middle East. This extensive infrastructure firmly establishes Dubai as a pivotal node in global medicine distribution—a position now gravely threatened by the escalating conflict.
According to the Jebel Ali Freeport Authority (JAFZA), approximately 400 pharmaceutical and healthcare companies from 60 countries operate within its free zone. In 2020, half of Dubai’s pharmaceutical and health products, valued at $21.8 billion, reportedly transited through this port. India’s pharmaceutical exports, destined for Persian Gulf countries, Africa, Europe, and various other global destinations, also heavily rely on Jebel Ali.
However, recent Iranian military strikes have reportedly damaged both Dubai’s port and airport, disrupting crucial operations for the distribution of medicines and food. For the pharmaceutical industry, air freight plays an indispensable role, especially for high-value, urgent, or strictly temperature-controlled consignments. Disturbances to these distribution channels place immense additional pressure on global supply chains for drugs and vaccines.
While alternative routes to Dubai exist, most possess smaller capacities for handling pharmaceutical cargo volumes, entail additional transit days, and incur higher costs. All these factors ultimately contribute to potential price increases and reduced product availability, jeopardizing access to essential medical supplies worldwide.
Data from India’s Department of Commerce reveals that the country’s pharmaceutical industry exports products to 200 nations, with primary destinations including the United States, the UK, Brazil, France, and South Africa. Dubai’s airport and port facilities serve a dual function as both storage centers and re-export points for medicines, cementing their status as vital hubs in the global pharmaceutical business.
3. Disruption of Electronics, Metals, and Chemicals Distribution
The conflict’s tremors are also being felt across the distribution of critical chemical elements like sulfur and essential industrial raw materials such as aluminum. Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, and Iran are among the leading exporters of sulfur, which is primarily a byproduct of oil and gas refining processes.
According to the U.S. Geological Survey, approximately 24% of the world’s sulfur production originates from the Middle East. While a significant portion is utilized in fertilizers, sulfur also plays a crucial role in the extraction of vital minerals and metals like copper and nickel. These, in turn, are indispensable components for manufacturing a wide array of modern products, including household appliances, vehicles, electrical grids, semiconductors, batteries, and stainless steel.
The war’s impact is already evident in this sector. Within the first week of the conflict, nickel producers in Indonesia—a nation supplying over 50% of the world’s nickel—announced production reductions. This curtailment was directly attributed to disrupted sulfur supplies from Gulf countries, despite Indonesia’s nickel industry depending on the region for 75% of its sulfur needs.
Reuters reported that several copper producers in Africa are likely to face a similar predicament to their nickel industry counterparts in Asia. “The battle for [sulfur] supply will pit Indonesian nickel mines against African copper mines, both competing with fertilizer producers worldwide also seeking Middle Eastern sulfur replacements,” Reuters stated.
Sulfur holds strategic importance as a key ingredient in the production of sulfuric acid, a vital component in manufacturing semiconductors and chips. Disruptions to the supply of this critical chemical could have far-reaching consequences for the production of numerous essential modern products—from smartphones, computers, and memory cards to vehicles and various electronic devices found in homes, offices, and factories.
This isn’t the first time the world has faced such a crisis. During the COVID-19 pandemic, a severe chip shortage significantly constrained the production volume of electronic devices and simultaneously drove up their selling prices. The crucial difference this time, however, is an additional factor: an unprecedented surge in demand for chips from companies developing and implementing artificial intelligence models, further exacerbating potential supply constraints.
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Summary
The ongoing conflict involving the United States, Israel, and Iran has rapidly created global economic turbulence, initially spiking oil prices due to disruptions in the critical Strait of Hormuz. This conflict profoundly impacts global food security by threatening the supply of nitrogen fertilizers from major Gulf exporters. Production halts, export difficulties through the closed Strait of Hormuz, and China’s export restrictions have surged fertilizer prices. This situation creates a dire outlook for agriculture, risking food shortages and price increases within months.
Furthermore, global medicine distribution is severely hampered as attacks damage Dubai’s crucial port and airport, key hubs for pharmaceutical logistics, especially for India’s generic drug exports. This disruption strains supply chains, potentially increasing costs and limiting access to essential medicines worldwide. The conflict also affects the supply of sulfur from the Middle East, vital for extracting metals like nickel and copper, and for semiconductor production. Indonesia’s nickel industry has already reduced output due to sulfur shortages, jeopardizing the manufacturing of electronics amid high demand for AI chips.