How the Iran war reshaped the global economy — and created winners and losers

As American and Israeli forces relentlessly bombed Iran in the opening days of war, dire predictions about its economic toll circulated. However, six months into the conflict, the extent of the damage has fallen short of expectations. Michael Ashley Schulman, an investment strategist with Cerity Partners, stated that the global economy has managed to avoid the severe consequences predicted, likening it to a "Mission Impossible" scenario.

This analysis delves into how the global economy has withstood the war, highlighting both winners and losers.

Winners:

Investors who remained calm during the turmoil reaped significant gains. Despite the initial market turmoil triggered by the war, the Dow, S&P 500, and Nasdaq have all rebounded strongly. The Dow has risen nearly 19%, the S&P 500 almost 22%, and the Nasdaq 27% since hitting a bottom in late March. The International Monetary Fund's report suggests that while the war is straining growth, advancements in artificial intelligence are offsetting some of the negative effects.

Historically, consumers have faced higher costs for fuel, food, and travel due to disrupted oil supplies. However, Wall Street has largely shrugged off these concerns.

Losers:

Individuals impacted by mobility restrictions have been significant losers. Tanker traffic through the Strait of Hormuz has been severely restricted, causing Brent crude prices to climb from around $72 a barrel to nearly $120. Although prices have slightly eased, they remain about 20% higher than before the conflict. This price surge has wide-ranging consequences, affecting everything from everyday items like crayons and cosmetics to critical services such as aviation.

Airlines have responded by raising ticket prices, introducing fuel surcharges, and cutting flights. Lufthansa Group, for instance, reduced 20,000 short-haul flights. Spirit Airlines, which had been struggling, ceased operations altogether. The limited options and increased costs for air travel have left consumers with fewer choices and less competition, leading to higher fares.

Winners:

The clean power sector has gained a significant boost from the war. With oil supplies disrupted and fuel prices soaring, there has been a renewed emphasis on renewable energy sources. Sales of electric vehicles (EVs) have reached all-time highs in several countries. In Singapore, EV sales have grown by 110% year-over-year, New Zealand has seen an increase of 180%, and Colombia has experienced a staggering 300% rise.

According to the International Energy Agency, EVs are projected to account for 29% of total vehicle sales in 2026, up from 25% last year. This surge in EV adoption is particularly notable given that the world's two largest economies, the United States and China, have seen declining demand for EVs. Additionally, countries heavily reliant on Arabian Gulf oil, such as those in Southeast Asia, have accelerated the adoption of renewable energy and nuclear power.

In Africa, countries are expanding domestic refining capabilities and increasing solar panel installations. These developments signal a global shift towards cleaner energy sources as a response to the economic pressures of the war.

Losers:

The humanitarian impact of the war has been particularly severe for the poorest populations. The Gulf region, known for its dominance in global oil and fertilizer production, has faced a significant setback. Fertilizer prices surged by 44% in April, peaking at 44% higher than pre-war levels. This rise has prompted many farmers to reduce fertilizer usage, risking the health of their soil and next year's harvests.

The United Nations World Food Programme warns that tens of millions could fall into hunger as a result. The cost of transportation, exacerbated by the war, has hindered the WFP's humanitarian efforts, making it more difficult to deliver aid to vulnerable populations. In essence, while the rich may experience minor inconveniences, the poorest face severe hardships, with the lack of fertilizer potentially jeopardizing food security in already vulnerable regions.