By Dr. Yonas Workineh
Since late February 2026, a major war has erupted in the Middle East involving the United States, Israel, and the Islamic Republic of Iran.
The conflict began on February 28, when coordinated U.S. and Israeli military strikes hit multiple strategic targets across Iran, including political and military leadership compounds, in what was described by U.S. and Israeli officials as a preemptive effort to degrade Iran’s military capabilities. ongoing nuclear programs and prevent further threats to regional security.
During these initial strikes, Iran’s Supreme Leader, Ayatollah Ali Khamenei, the country’s top political and religious authority who had led the nation since 1989, was assassinated in Tehran along with several high-ranking officials in his administration.
The 86‑year‑old cleric’s death marked an extraordinary escalation in modern geopolitics, as the supreme leader wielded ultimate authority over Iran’s government, military, and foreign policy.
In the weeks after Khamenei’s killing, the war widened as Iran retaliated with sustained missile and drone attacks on Israeli territory, U.S. military bases and across the region.
Israeli and American forces have continued to conduct airstrikes and targeted operations to dismantle Iran’s military infrastructure, striking key facilities and commanders, including the assassination of the Islamic Revolutionary Guard Corps (IRGC) Navy commander, Admiral Alireza Tangsiri, who was credited with enforcing Iran’s control over the strategic Strait of Hormuz.
These operations were justified by Israel and the United States as necessary to weaken Iran’s ability to interfere with international shipping and to deter future missile and naval threats.
The assassination of the Iranian supreme leader has sent shockwaves throughout the region and the world. In Iran, the sudden loss of its most powerful figure triggered immediate political upheaval, with a successor being appointed amid the chaos of war.
The power transition has been marked by uncertainty, further complicating prospects for negotiation or de‑escalation, as hardline elements within Iran’s political and military leadership have gained greater influence.
This dynamic has intensified Iranian reprisals and hardened positions on both sides of the conflict.
The war’s global economic impact has been profound and swift. Almost one‑fifth of the world’s crude oil and liquefied natural gas historically flows through the Strait of Hormuz, the narrow sea passage connecting the Persian Gulf to the Gulf of Oman.
With Iran’s military activities threatening this crucial chokepoint and merchant shipping reducing traffic to avoid risk, oil markets reacted sharply, sending energy prices to their highest levels in years.
Higher fuel costs have rippled through global economies, pushing up the price of transportation, industrial production, and food — since energy is a core input for agriculture and logistics worldwide. The disruption has also affected liquefied natural gas markets, raising heating and industrial energy costs for countries dependent on LNG (Liquefied natural gases) imports.
The consequences have been particularly severe for developing countries that lack domestic energy resources or alternative supply routes. Nations in Africa, South Asia, and Latin America are now facing steep increases in import bills for fuel and essential goods.
These nations often have limited fiscal capacity to absorb higher energy costs, leading to sharp increases in the price of electricity, cooking fuel, and transport.
For many ordinary citizens in developing countries, rising energy costs mean higher prices for basic commodities such as food and consumer goods, straining household budgets and increasing poverty risks.
Social and economic stability in these countries is being tested as governments struggle to manage inflation without jeopardizing economic growth.
Beyond energy, global trade and supply chains have also suffered. Airspace closures and safety concerns have forced many airlines to reroute flights, extending travel times and raising operational expenses.
Shipping companies have increasingly avoided routes near the Persian Gulf, causing delays, increasing freight rates, and prompting war‑risk insurance premiums that further inflate costs for import‑dependent countries.
Industrial sectors that rely on timely delivery of components have reported disruptions, slowing manufacturing and economic activity. The world’s financial markets have mirrored these concerns: stock indices have been volatile, commodities like gold have risen as investors seek safe havens, and currency markets, especially in emerging economies, have seen abrupt shifts as capital moves toward perceived stability.
The war’s humanitarian toll is also rising. In addition to casualties from direct strikes, disruptions to food supplies, increased cost of living, and dislocation from escalating violence have strained public services and safety nets in several regions.
International aid agencies have warned that sustained instability could lead to food insecurity and heightened suffering in vulnerable populations, particularly in parts of Africa and the Middle East that already face economic and social challenges.
The United States–Israel–Iran war — intensified by the targeted assassination of Iran’s supreme leader — has rapidly transformed from a regional confrontation into a crisis with global ramifications. Its impacts on energy markets, global trade, inflation, and financial stability underscore the interconnectedness of geopolitical conflict and the world economy.
Developing countries, without energy alternatives or strong economic buffers, are feeling the effects most acutely, facing rising costs and economic uncertainty.
As the war continues, the prospects for a negotiated peace remain uncertain, leaving economies and societies around the world to grapple with the consequences of one of the most significant conflicts of the decade.
