Impact of Middle East Tensions on the Global Economy and Commodity Markets

On February 28, 2026, the United States and Israel began attacks on Iran, and Iran retaliated the same day. Attacks on US military bases and energy facilities in the Gulf states damaged Saudi Aramco's oil facilities and QatarEnergy's LNG-related facilities, impairing energy production capacity. On March 2, Iran's Islamic Revolutionary Guard Corps announced the closure of the Strait of Hormuz, through which about 20% of global oil consumption passes.

Because the Gulf states account for about 30% of global crude oil production and slightly less than 20% of natural gas production, navigation restrictions and facility damage directly heightened concerns about global supply. About 80% of Qatar's LNG exports are destined for Asia, leaving Japan, China, South Korea, and India particularly vulnerable to disruptions in natural gas supplies.

The impact spread beyond energy prices to non-energy resources such as fertilizer, prices, logistics, tourism, and consumption. However, consumer price inflation and production activity in major countries and regions during the first half of 2026 have not deteriorated as uniformly or substantially as they did during the energy price surge of 2022.

Crude oil prices rose from 67.02 US dollars per barrel on the day before the attacks began to 102.88 US dollars per barrel on March 30, 2026, and 112.95 US dollars per barrel on April 7. Prices then declined following the ceasefire agreement and memorandum, falling below 70 US dollars per barrel on June 25 and moving back toward pre-attack levels. From February 27 to March 31, 2026, prices of natural gas, jet fuel, and fertilizer rose by 59.0%, 107.4%, and 50.0%, respectively.

One estimate indicates that if fertilizer prices rise by nearly 50%, international commodity prices in the agricultural sector will rise by 4% in 2026 and 8% in 2027. As of June, agricultural commodity prices had not shown a substantial increase, but if fertilizer prices surge again, household burdens could increase, particularly for low-income households, through higher food prices.

In major countries and regions, higher fuel prices pushed up producer and consumer prices, while for companies, increases in procurement prices outpaced increases in selling prices. Delivery delays also emerged in global manufacturing, placing pressure on corporate earnings and supply chains. Consumption remained solid in the United States, while reduced consumption of automotive fuel in the euro area slowed growth in overall retail sales.

Tanker cargo volumes passing through the Strait of Hormuz fell sharply from early March and remained near zero until mid-June. Shipments from Saudi Arabia's Yanbu Port increased along alternative routes, while the United Arab Emirates' Fujairah Port fell below 2025 levels because of the attacks. Although signs of a recovery in navigation appeared after mid-June, exports of crude oil and other products from the Gulf states remained constrained.

The oil market had a supply surplus of around 2 million barrels per day from 2025 through early 2026, but shifted to a supply shortage of 5.6 million barrels per day in March 2026. The IEA expects a supply shortage of 900,000 barrels per day in 2026 and a supply surplus of 5 million barrels per day in 2027 if the agreement is maintained, while downside risks related to operations and politics remain.

In Asia, crude oil imports declined: China's imports in May 2026 fell by about 30% compared with the average of the previous five years, South Korea's imports in April fell by about 25%, and India's imports in March fell by about 30% compared with the average of the previous four years. Following strategic stockpile releases and alternative procurement, imports in India and South Korea later recovered to near their historical-average ranges.

The Gulf states experienced a substantial decline in production and export activity. Saudi Arabia's industrial production fell 15.8% year on year in March 2026, goods export volume fell 22.7%, and real GDP growth slowed to 3.0% year on year in the first quarter of 2026. Qatar's Ras Laffan Industrial City may require 3 to 5 years for full restoration of its facilities.

In terms of policy and corporate behavior, countries eased supply shortages and household burdens by releasing crude oil reserves, procuring supplies from alternative sources, and cutting or controlling gasoline prices. In Europe, lower dependence on the Strait of Hormuz, the expansion of renewable energy, and reduced fossil fuel consumption kept price increases smaller than in 2022. In aviation, higher fuel costs and cancellations spread to fares, logistics, and tourism, and Lufthansa announced that it would cancel 20,000 flights by October 2026.