Markets are pricing in higher odds that the war with Iran has ended, but even if that proves true, the economic effects of the conflict will linger for months, if not years.
Most of the world’s attention is focused on the immediate drama of conflict—military attacks, closures, and sanctions. But the most destabilizing effects of war in the Persian Gulf don’t unfold in real time. They arrive with a delay, reverberating slowly across oceans in the hulls of tankers and reflected in reduced exports of and crucial agricultural feedstocks. That lag in transit time suggests the global economy has only begun to feel the consequences of reduced exports from the region.
“Wars have a way of revealing the world’s hidden architecture,” writes Comfort Ero, president and CEO of the International Crisis Group. “We notice the narrow straits, the fragile chokepoints, the invisible bargains that keep daily life intact only when they begin to fail. Today, the Strait of Hormuz is one such place.”
Oil exported from the Persian Gulf typically takes 30–45 days to reach major markets in Europe, Asia, and the Americas. When conflict disrupts production or shipping lanes, the impact isn’t instantaneous. Instead, the world consumes existing inventories while the flow of new supply slowly declines. By the time the shortage becomes visible in destination markets, the underlying problem has already been compounding for weeks.
The sharp reduction in oil production and exports last month is the first sign that the disruption in global supply is beginning to reverberate. OPEC’s production fell by 27% in March — a record drop — and prospects for a quick rebound look dim, even if the current ceasefire holds. In the best‑case scenario, it will take months for Gulf states to restore production to normal levels, predicts Sheikh Nawaf al‑Sabah, CEO of Kuwait Petroleum Corp.
Meanwhile, the lag in energy exports fosters a misleading illusion of stability as attention shifts to the decline in military attacks. But the war’s effects will resonate far into the future.
Luke Gromen, president of Forest for the Trees, a research shop, recently noted that seven weeks into the conflict the Strait of Hormuz is still closed. “Supply chain issues are just now really starting to to stack up.” As an example, he cites Toto, a Japanese toilet maker, has halted new orders for its prefabricated bathrooms due to material shortages as the Iran war continues to strain the global oil supply chain.
Consider the US farming industry. The planting season ends in about six weeks, and surging fertilizer prices driven by the conflict are forcing farmers into a corner: reduce planting or proceed as planned and absorb a financial hit. A survey by the American Farm Bureau Federation reports that “nearly six in 10 farmers report worsening finances, reflecting rising fertilizer and fuel costs during spring planting.”
Although only a small fraction of pre‑war commercial traffic has moved through the strait in recent days—an improvement from the near‑shutdown in previous weeks—it remains unclear how quickly exports will recover.
“Even if the strait were to reopen soon, the underlying supply and logistical stresses of the waterway’s closure will likely persist for months,” notes the Atlantic Council. “Much of the region’s refining capacity has been damaged or destroyed during the conflict, and the infrastructure required to process and export commodities may take years to fully rebuild.”
Oil is hardly the only export at risk. The Persian Gulf is a major source of natural gas liquids, ammonia, urea, and other petrochemical feedstocks essential for global fertilizer production. A sustained disruption in these flows threatens agricultural supply chains far beyond the region.
A delay of even a few weeks in feedstock shipments can cascade into reduced fertilizer availability, lower crop yields, and higher food prices months later.
The war’s impact on oil and fertilizer feedstocks is a slow‑moving shockwave. The world is still in the early phase, buffered by inventories and pre‑conflict shipments. But as the lag catches up, reduced exports from the Persian Gulf will exert growing pressure on energy prices, food production, and global economic stability.
The real effects aren’t behind us. They’re just beginning to arrive.