The economic shockwaves from the conflict in the Persian Gulf are no longer confined to geopolitical briefings or trading floors; they have reached the gas pumps of remote alpine villages and the dinner tables of the developing world. In the Swiss canton of Uri, for instance, diesel prices recently climbed to 2.31 francs per liter, while unleaded 95 hit 2 francs—increases of more than 20 percent and 10 percent, respectively, over pre-war levels. These price spikes are the first visible symptoms of a systemic crisis that threatens to destabilize the global economy.
At the heart of the volatility is the Strait of Hormuz, a narrow maritime chokepoint between the Persian Gulf and the Gulf of Oman. This passage is the world’s most critical energy artery, facilitating the transport of approximately 20 percent of the global oil supply and 25 percent of liquefied natural gas (LNG). With the strait currently barely passable, world market prices for oil and European gas have surged by over 60 percent, triggering a chain reaction across global supply chains.
The risk of a broader Iran escalation could push the global economy into a recession, as the conflict evolves from a regional military engagement into a structural energy crisis. While some nations are buffered by domestic reserves, the intersection of energy scarcity and infrastructure damage is creating a precarious environment for global growth.
Gewitter über dem Persischen Golf: Der Erdöltanker Meta 4 läuft am 21. März in Maskat im Oman in den Sultan-Qabus-Hafen ein.
Elke Scholiers / Getty
The Infrastructure Risk and the ‘Stone Age’ Rhetoric
The volatility is exacerbated by aggressive political rhetoric. U.S. President Donald Trump recently indicated that while military objectives may soon be met, he intends to hit Iran “extremely hard” over the coming weeks, stating, “We send them back to the Stone Age, where they belong.”
For economists, the danger lies not just in the rhetoric, but in the potential for physical destruction of energy infrastructure. The closure of the Strait of Hormuz is a temporary logistical hurdle, but the permanent loss of production capacity is a systemic threat. Currently, two of Qatar’s 14 LNG liquefaction plants have sustained damage so severe that repairs are expected to take years.
Fatih Birol, head of the International Energy Agency (IEA), warned that energy supplies in April would be significantly tighter than in March. Here’s because the “buffer” of tankers that left the Persian Gulf before the outbreak of hostilities has already reached its destination. With few new tankers following, the world is entering a period of acute supply vulnerability.
From Energy Shocks to Food Insecurity
The crisis extends far beyond the price of a gallon of gas. In a phenomenon known as a “cascade effect,” energy shocks rapidly transform into agricultural crises. Natural gas is a primary feedstock for nitrogen-based fertilizers; when gas prices soar or supplies vanish, fertilizer production drops, leading to crop failures and food inflation.
Julian Hinz, Director of Trade Policy at the Kiel Institute for the World Economy, notes that an energy shock quickly leads to a fertilizer shock and subsequently a food crisis, particularly in nations dependent on imports. This pattern is already emerging in developing and emerging economies across Africa and Asia. In countries such as Zambia, Sri Lanka, and the Democratic Republic of the Congo, the loss of purchasing power is acute. In Africa, where food is often transported over vast distances, rising fuel costs translate directly into higher grocery prices.
The economic vulnerability is not limited to energy. Several Gulf states—including Iraq, Kuwait, Bahrain, Qatar, and the UAE—dominate the export of critical non-energy goods. These items must also pass through the Strait of Hormuz, creating bottlenecks for a surprising array of global products.
| Country | Key Export Goods |
|---|---|
| Iraq | Dates, steel constructions |
| Kuwait | Processed cheese, milk concentrates |
| Qatar | Noble gases, urea fertilizers |
| UAE | Aluminum alloys, raw gold, diamonds |
Industrial Fallout and the Threat of Stagflation
In Europe, the conflict is colliding with a fragile economic recovery. The Eurozone has already seen inflation jump from 1.9 to 2.5 percent, a rise driven almost exclusively by a 5 percent increase in energy costs. This has led financial markets to anticipate interest rate hikes by the European Central Bank (ECB) to combat rising prices.
The industrial impact is particularly severe in Germany, the region’s largest economy. Chemical giants such as BASF and Lanxess have been forced to raise prices for specific chemical products due to raw material shortages, which in turn increases costs for consumer goods companies like Henkel and Unilever. The damage is reflected in growth forecasts: leading German economic research institutes recently slashed their 2026 growth projection from 1.3 percent to just 0.6 percent, attributing half of that decline to the conflict in Iran.
This combination of stagnating economic growth and rising inflation is the definition of stagflation. While the United States is more insulated due to its high level of energy self-sufficiency, it is not immune, with domestic gasoline prices already showing a marked increase.
The Swiss Perspective: A Buffer with Limits
Switzerland remains relatively shielded but is not decoupled from the crisis. While the strong Swiss franc helps lower the cost of imports and dampen inflation, the country’s deep integration into European supply chains creates indirect risks. The VAT Group, a manufacturer of high-performance vacuum valves, recently reported missing its first-quarter revenue targets, citing delivery disruptions caused by the conflict.
The KOF Swiss Economic Institute has seen its business barometer decline, reflecting a general cooling of the economy. While the Swiss State Secretariat for Economic Affairs (SECO) does not currently anticipate a full-scale recession in Switzerland, that outlook depends entirely on the duration of the conflict. If infrastructure destruction becomes widespread, the “metastases” of the crisis will likely spread further into the Swiss economy.
Disclaimer: This article is for informational purposes only and does not constitute financial, investment, or legal advice.
The global economy now awaits the next set of energy reports from the IEA and potential diplomatic shifts in Washington and Tehran. The critical checkpoint will be the April supply data, which will reveal whether strategic reserves released by IEA member states in mid-March were sufficient to offset the shortfall in tanker traffic.
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