With the United States-Israeli war on Iran entering its 60th day, experts warn that there is no end in sight, as negotiations continue to be “stalled” amid soaring oil prices and inflation.
The US and Israel launched their attack on Iran on February 28. Tehran retaliated by closing off the Strait of Hormuz, the narrow channel linking the Gulf to the Gulf of Oman, through which approximately 20 percent of the world’s oil and gas exports pass from the Middle East, mainly to Asia and also to Europe.
More recently, the US has put in place its own blockade to cut off any ships carrying Iranian oil and eventually force the country to shut off production once it runs out of storage space and seek a resolution.
With the two locked into a standoff, oil prices have continued to soar. On Tuesday, WTI crude was at $100.09 at 12:30pm ET [16:30 GMT] – up from $67.02 the day before the attacks – and Brent crude was trading at $111.85, up from $72.87 on February 27.
At the pump in the US, that has translated into the highest level in nearly four years for the average price of petrol. Petrol prices were at nearly $4.18 a gallon ($1.10 a litre) on Tuesday, up from the national average of $2.92 since late February, according to data from the American Automobile Association.
“Negotiations seem stalled … and any near-term resolution seems difficult,” said Rachel Ziemba, adjunct senior fellow at the Center for a New American Security.
“The US economy is more resilient than some others, but at the end of the day, we’re going to see a global impact on prices,” Ziemba added.
In the midst of all this, the United Arab Emirates announced on Tuesday that it would leave the oil cartel OPEC and OPEC+ effective May 1, a move long rumoured as it chafed against OPEC production quotas and had differences with Saudi Arabia, OPEC’s de facto leader. While the UAE’s move signals it wants to produce and sell more oil, that is not feasible while the strait remains closed, and for now, prices will continue to soar.
Rising prices
That effect on prices is showing up in the US, as well, and the consumer price index last month reached 3.3 percent on an annual basis, the highest level since May 2024, which was driven by a jump in energy prices.
Bernard Yaros, lead US economist at Oxford Economics, told Al Jazeera that the spillover effects from higher energy prices will add to core inflation over the next year.
“This reflects the passthrough of higher energy costs into non-energy commodities and services, which tends to peak three months after the initial energy shock,” Yaros said in an email. “Risks to this estimate are skewed to the upside, though, as higher energy prices will bleed into higher short-run inflation expectations, which influence wage-setting behaviour.”
On the global front, economic consequences of the conflict are expected to linger beyond any truce.
Ben May, director of Global Macro Research at Oxford Economics, said in an April 13 report that the firm was lowering its world gross domestic product (GDP) growth forecast by 0.4 percentage points since the start of March to 2.4 percent “because we expect a more prolonged disruption to shipping activity through the Strait of Hormuz … But even if a truce is maintained, it will take time for energy production and shipping traffic to return to normal levels.”
May said he expects Brent oil price to average about $113 per barrel in the current quarter before falling to just less than $80 per barrel by the end of this year.
The higher oil price, along with rising prices for petrol, fertilisers, and agricultural commodities, is expected to push up global inflation, he warned.
For the US, the heightened uncertainty and the squeeze to household real incomes come on top of US President Donald Trump’s tariffs, which, over the past year, have already pushed up prices and slowed down hiring and investments. Oxford Economics has downgraded US GDP growth to 1.9 percent from 2.8 percent, citing “weaker-than-anticipated activity” at the start of the year.
The ongoing war will also have consequences in the upcoming midterm elections in November. A new, four-day Reuters/Ipsos poll completed on Monday showed 34 percent of Americans approve of Trump’s performance in the White House, down from 36 percent in a prior Reuters/Ipsos survey, which was conducted from April 15 to 20.
The majority of responses were gathered prior to the Saturday night shooting at the White House Correspondents’ Association dinner, where Trump was due to speak, and it’s not clear if the incident changes people’s views.
Trump’s standing with the US public has trended lower since taking office in January 2025, when 47 percent of Americans gave him a thumbs-up. Now, only 22 percent of poll respondents approved of Trump’s performance on the cost of living, down from 25 percent in the prior Reuters/Ipsos poll.
‘Long-term disruptions’
David Coffey, a procurement and supply chain consultant with Catalant, warns that things will get worse, and he’s starting to see shelves not as well stocked.
The reason for that is that roughly 11 percent of global maritime trade transits the strait each year — that includes minerals and energy-intensive commodities like fertilisers, chemicals, petcoke, cement, oilseeds and grains, explained libertarian Cato Institute’s Scott Lincicome in an article in the Dispatch last month.
A disruption in supplies and a global rise in prices of these and other commodities are hurting industries everywhere, including the US.
Coffey rattles a long list of areas sensitive to a squeeze, including industrial manufacturing, car parts, pharmaceuticals, fertilisers, to name a few.
“Even if fuel supplies restart, it’ll be a few weeks before it can reach anywhere. There will be long-term disruptions … And with no end in sight, it’s going to be worse. Companies are looking at, ‘How do we rejig our supply sources?’ But there’s no substitute for fuel.”