War in Iran is raising costs

What's happened

The US‑Israel war on Iran has pushed energy, fertilizer and transport costs higher and forced global agencies to cut growth forecasts. The OECD and other groups have reduced 2026 growth projections, UNICEF has reported soaring freight bills and delivery delays, and US consumer sentiment has ticked up slightly as gas prices ease (15 June 2026).

What's behind the headline?

A persistent shock, not a passing blip

The fighting has transformed a short shock into a drawn‑out energy and logistics crisis. Higher freight and insurance costs are adding weeks and large price tags to shipments; UNICEF says air and rerouted sea freight are raising delivery costs by tens of percent and delaying supplies by weeks to months. Those extra costs are already forcing aid agencies and governments to reallocate funds away from programmes.

Who will bear the cost

• Low‑income countries will absorb the biggest hit: they spend a larger share of income on fuel and food and have limited fiscal space. UNICEF and multilateral agencies are warning that poorer states will face tougher trade‑offs between energy bills and social services.
• Consumers in advanced economies will feel the shock through higher petrol and grocery bills; University of Michigan data show sentiment rose slightly as pump prices fell, but remains near levels linked with severe stress.

Policy trade‑offs are narrowing

Central banks and finance ministries are confronting a choice: tolerate temporarily higher imported inflation to support growth, or tighten policy and risk deeper slowdowns. The OECD and some central bankers are shifting forecasts and signalling that slower growth and higher inflation will last into next year, constraining fiscal room for manoeuvre.

What will happen next

• Global growth will slow and remain weaker through 2027 if shipping through Hormuz does not return to pre‑war levels. The OECD's scenarios show growth falling to as low as 2.1% in a prolonged disruption.
• Humanitarian supply chains will continue to strain: deliveries will take longer and cost more, forcing agencies to cut quantities or programmes unless funding rises.
• Political pressure will increase on governments to pursue and secure a durable reopening of Gulf shipping lanes; failure to do so will force higher energy prices and slower growth.

These dynamics are already reshaping budgets, trade flows and election narratives. Expect energy‑linked inflation to remain a central economic drag through next year unless shipping and production recover quickly.

How we got here

The conflict began with US‑Israeli attacks on Iran in late February, triggering Iranian actions that have disrupted traffic through the Strait of Hormuz. That waterway once carried about a fifth of global oil and LNG. Shipping diversions, higher insurance and damaged infrastructure have driven energy and transport prices up worldwide.

Our analysis

The coverage varies by emphasis and tone. The OECD and Reuters reporting focus on macro forecasts and quantifiable risks: Reuters noted that multilateral heads warned the conflict is "disproportionately affecting poorer countries" and highlighted risks from drawn‑down oil inventories. CNBC and New York Times Business quoted OECD and Barclays economists who have downgraded growth forecasts and described a shift from a hoped‑for quick V‑shaped shock to a slower U‑shaped slowdown. Humanitarian reporting in All Africa, The New Arab and UNICEF statements (quoted by Reuters) showed the operational realities on the ground. UNICEF's Jean‑Cedric Meeus warned that "transportation and logistics costs alone are having a tremendous impact," and gave specific examples: air freight costs for vaccines rising 50–70% and trucking costs for therapeutic food up 30%, forcing agencies to choose which supplies to cut. Reuters reported UNICEF nearly exhausted annual logistics contributions in the first quarter and face delivery delays of up to six months. U.S.‑focused outlets (Independent Business, Axios, The Guardian) tied the economic story to politics and public sentiment. Independent Business quoted Heritage Foundation economist E.J. Antoni saying Producer Price Index readings show wholesale prices up 6.5% year‑on‑year and CPI up 4.2%, and highlighted Republican concern that higher prices could become a political liability. The Guardian and Axios both used University of Michigan survey data to show that falling pump prices have eased sentiment mildly but that overall consumer mood remains weak; Joanne Hsu said consumers "feel burdened by the recent escalation in inflation." These pieces link energy prices directly to voter sentiment and midterm politics. Together, the sources establish a consistent picture: macro forecasters are cutting growth and raising inflation paths; humanitarian agencies are facing immediate cost and delivery shocks; and voters are responding to higher living costs even as gas prices softe

Go deeper

• How long will shipping through the Strait of Hormuz remain disrupted?
• Which countries are most at risk of food and fuel shortages if the conflict continues?
• How are central banks likely to respond to sustained higher imported inflation?

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