The ongoing war between the US and Iran, which began on February 28, has sent shockwaves through the global economy, particularly in the energy and food sectors. Oil prices have surged above $100 a barrel, with a fifth of the world's oil supplies flowing through the Strait of Hormuz, which Iran now claims sovereignty over. The conflict has also driven up the cost of fertilizers and other essential chemicals, contributing to rising food prices worldwide.
Iran's economy was already struggling before the war, with the rial having lost 97% of its value since 2015 and food inflation at 70%. The war has exacerbated these issues, though the full extent of the economic impact is unclear due to an internet blackout that has made data collection difficult. Professor Djavad Salehi-Isfahani of Virginia Tech suggests that the government is managing the distribution of essential commodities through cash transfers, ensuring that people can still access basic goods despite the war.
Ironically, the war has benefited Iran's economy in some ways. The surge in oil prices has allowed Iran to export more oil, with exports likely exceeding 1 million barrels per day. The US has even lifted some sanctions, permitting Iran to sell oil that was already on ships, providing the country with much-needed foreign currency. However, the long-term economic effects remain uncertain, as the war continues to disrupt global supply chains and markets.