New Delhi (Hridaya Mohan): The dramatic US airstrike on Iran’s nuclear facilities—executed by B-2 stealth bombers—has turned a regional confrontation into a global economic crisis-in-the-making. Tehran’s immediate retaliation on Israeli targets and later on the US bases in Mid-East has escalated the crisis, triggering fear, uncertainty and vortex of volatility across the world. At the heart of it all lays a toxic mix of oil shock, trade war rumblings and geopolitical instability—putting the fragile global recovery at grave risk. For India, a nation heavily reliant on oil imports and deeply invested in regional stability, the stakes are particularly high.
Oil Shock: The First Domino
The most immediate impact has been on global energy markets. Iran is a key player in global oil markets, and any disruption in its exports sends shockwaves across the world. Brent crude rose 3% post US attacks. Goldman Sachs has raised concerns over potential oil price surges above $110 per barrel as fears of disruption in the Strait of Hormuz—the artery for a third of the world’s oil—gripped traders. With Iran now threatening to block the Strait of Hormuz the risk of a full-blown energy crisis looms large. Tanker routes are being reassessed, insurance premiums are soaring and energy-importing countries are bracing for impact.
For India, which imports over 80% of its oil needs, and other energy-dependent nations, this spells economic stress: rising fuel prices, a widening trade deficits and a renewed inflation threat. Rising fuel prices could stoke inflation, weaken the rupee and derail economic growths at a time when the country can least afford it. Central banks may be forced to raise interest rates just when many economies need stimulus. The global fight against inflation may now become harder and longer.
Trade War: Old Ghosts Return
The conflict has revived fears of a new round of protectionism. As the US imposes fresh sanctions on Iran, it is also signaling secondary sanctions on countries and companies that continue to do business with Tehran. China, which maintains significant oil and infrastructure ties with Iran, may resist US pressure—triggering new friction in an already strained bilateral trade relationship.
In retaliation, Beijing may impose or raise its own tariffs on US goods, limit technology exports, or deepen alliances with Russia and other sanctioned states—further fragmenting global trade.
If retaliatory tariffs return, so could the ghosts of the 2018–19 US-China trade war. That conflict had disrupted supply chains, dampened global demand and sent shockwaves through emerging markets. A repeat in the current fragile scenario could stall global growth and choke the trade-dependent recovery.
Financial Turmoil: Markets Rattle, Currencies Wobble
Financial markets have responded with alarm. Stock markets from Tokyo to Frankfurt and New York witnessed immediate declines as investors scrambled for safety. Safe-haven assets like gold and the US dollar surged and bond yields declined as investors sought shelter. In emerging markets, currencies weakened, triggering central bank interventions. Capital is once again flowing out of riskier assets and into perceived safety.
The volatility is not just about oil—it reflects wider uncertainty about how far the crisis might spiral. If the US or Iran suffer cyberattacks, sabotage or wider military escalation, global markets could face sustained stress.
This financial uncertainty adds a new layer of risk for debt-laden developing economies. With global capital markets under stress and foreign investment flows slowing, the road ahead could be bumpy for countries like India, South Africa, Turkey and Brazil.
Supply Chains and the Risk of Global Slowdown
Global supply chains were just beginning to recover from the disruptions of the pandemic and the Ukraine war. Now, instability in the Middle East threatens another jolt. The Gulf region is not just a source of oil—it is vital for petrochemicals, fertilizers and key inputs in manufacturing and agriculture.
If shipping routes through the Red Sea, Suez Canal or Strait of Hormuz are affected, delivery times and costs will spike again. Inflation will re-enter supply chains. Many economies, already slowing, could tip toward recession if the disruption is prolonged.
India’s Strategic Dilemma
The current crisis forces India in a tight spot. As a strategic partner of both the US and Israel and with deep commercial and civilizational ties to Iran, India must tread carefully. The country also engages with Gulf powers like Saudi Arabia and the UAE. The Chabahar port, a key part of India’s regional outreach strategy, may suffer if the conflict expands. Meanwhile, the rupee has weakened and the RBI may be compelled to manage market volatility while ensuring adequate liquidity.
For India, the stakes are economic as well as geopolitical: affordable energy, diaspora safety and regional stability all hang in the balance.
India must leverage its diplomatic capital to advocate for de-escalation while securing its economic and security interests. Engaging with regional players and multilateral forums to prevent further instability will be crucial.
A War With Global Economic Collateral
The US-Iran conflict is no longer just a strategic flashpoint—it is a destabilizer of the global economic order. Energy prices are rising, trade fault lines are re-emerging and market volatility is spreading and tariff tensions are simmering anew. The world now faces the prospect of stagflation, investment retreat and renewed great-power rivalries.
The world cannot afford another prolonged conflict in the Middle East. The US and Iran must step back from the brink and the international community—including India—must push for dialogue over confrontation. In an interconnected world, no nation remains untouched by geopolitical fires. The question is not whether India will be affected, but how well it can weather the storm.
Whether this is a passing storm or the beginning of a prolonged period of geopolitical-economic realignment depends on what happens next. But for now, the message is clear: war in West Asia means economic pain everywhere.
About the Author
Mr. Hridaya Mohan (hridayamohan@yahoo.co.in) is a regular Columnist with a renowned Indian daily “The Hitavada”, “Bharat Neeti Media” and some other newspapers / magazines internationally. Superannuated as Executive Director, Steel Authority of India Ltd. (SAIL), he is Senior Adviser, Metallon Holdings Pvt. Ltd. presently. He headed SAIL office at Beijing as Chief Representative (China & Mongolia) for six years. He has published and presented seventeen papers globally. Recipient of “Sir M Visvesvaraya Gold Medal”for one of his papers, “Benchmarking of Maintenance Practices in Steel Industry” from The Institution of Engineers (India), he was awarded with “Scroll of Honour” for the excellent contributions to Engineering fraternity from IE(I), Bhilai, “Jawahar Award” for leadership excellence in SAIL and “Supply Chain Leader – 2017” award from IIMM.
