NEW DELHI, Sept. 22
The US-Iran conflict is sending an economic shock well beyond West Asia, driving up oil and gas prices, disrupting shipping and increasing inflationary pressure across major economies, with energy-dependent countries such as India and Japan facing some of the most immediate costs.
Disruption in the Strait of Hormuz, the narrow waterway through which about one-fifth of global oil normally passes, has been central to the pressure on energy markets. Brent crude moved back above $100 a barrel in September, while S&P Global estimated that its average price during the first half of the month was more than 40 per cent above its early-July low.
The consequences are spreading unevenly across the global economy. Countries heavily dependent on imported oil and gas face rising fuel, transport and production costs, while major energy producers have greater protection from the supply disruption.
The International Monetary Fund’s July 2026 World Economic Outlook projected global growth of 3 per cent this year, compared with an average of 3.5 per cent in 2024 and 2025. The IMF said the war-related shock was weighing particularly on energy importers and vulnerable economies, although stronger investment in technology was offsetting some of the pressure.
Recent growth figures underline the differences between major economies. The US economy expanded 2.1 per cent year-on-year in the second quarter of 2026, while China’s grew 4.3 per cent. Japan recorded growth of 0.5 per cent, Germany 0.4 per cent and Britain 1.2 per cent, according to OECD data cited by Business Standard.
India remained considerably stronger, recording real GDP growth of 7.8 per cent year-on-year during the first quarter of the 2026-27 financial year, according to the Ministry of Statistics and Programme Implementation.
Those growth rates cannot be attributed solely to the conflict. Domestic economic conditions and other external factors remain important. A prolonged disruption to energy supplies, however, could place additional pressure on growth, particularly in countries dependent on imported fuel.
India’s exposure is already visible in its energy bill.
The country’s crude-oil import bill rose 48.4 per cent year-on-year to $74.8 billion between April and August, even though the volume of imported crude remained almost unchanged, according to Petroleum Planning and Analysis Cell data cited in the report. India spent $24.4 billion more on crude during the first five months of the financial year than during the same period a year earlier.
The pressure is also feeding into India’s broader trade position. The country’s trade deficit widened to $26.86 billion in August as crude import costs increased 25.8 per cent.
Japan faces a similar problem because of its dependence on imported energy. Its trade deficit reached 1.1 trillion yen in August, with petroleum imports rising 58.7 per cent. Germany and Britain are also exposed to higher fuel and shipping costs, adding pressure to industrial activity and external trade.
China occupies a somewhat different position. More than a third of its crude supply normally passes through the Strait of Hormuz, leaving it exposed to disruption in the waterway. But strategic reserves and a more diversified network of suppliers provide Beijing with some protection. China has also adjusted its refined-fuel exports as it manages changes in domestic and international energy supply.
The United States is better insulated on the supply side because it is a major producer and exporter of oil and natural gas. That does not protect American consumers from international prices. US fuel prices remain connected to global crude markets, and the national average price of regular gasoline was about $4.47-$4.48 a gallon on September 21.
Higher energy costs are also beginning to show up more clearly in inflation data.
US consumer inflation stood at 3.4 per cent in August, unchanged from July, but the energy index increased 16.3 per cent from a year earlier. In India, retail inflation accelerated to 4.82 per cent from 4.45 per cent in July, while food inflation reached 5.95 per cent.
Britain’s inflation rate rose to 3.1 per cent from 2.9 per cent in July, with motor fuel prices among the main contributors to the monthly increase. German inflation increased to 2.9 per cent, while energy prices were 10.5 per cent higher than a year earlier.
Japan’s headline inflation stood at 1.9 per cent in August. China remained an exception among the major economies, with consumer inflation of 0.8 per cent, although pressure was becoming more visible in factory-gate and producer prices.
The energy shock is also affecting currencies.
The Indian rupee and Japanese yen have faced pressure as higher oil prices increase import costs and demand for dollars. The US currency has remained relatively firm, while China’s yuan has shown greater resilience. The euro and British pound have also faced pressure as investors weigh the inflationary consequences of higher energy costs.
The economic effects extend beyond the immediate price of crude. Oil and gas feed into transportation, manufacturing, electricity generation, agriculture and the movement of goods. Higher fuel prices can therefore spread through an economy even when the initial disruption occurs thousands of kilometres away.
For central banks, that creates an additional complication. Higher energy prices can lift inflation while simultaneously weakening economic growth, making the balance between controlling prices and supporting economic activity more difficult.
The impact will not be uniform. The United States has the advantage of substantial domestic energy production. China has reserves and diversified sources of supply. European economies face higher transport and energy costs, while Japan remains heavily dependent on imported fuel.
For India, the immediate vulnerability lies in the scale of its crude imports. Strong domestic growth provides some economic cushion, but the sharp increase in the oil bill shows how quickly an external energy shock can affect trade and inflation even when import volumes change little.
Much will therefore depend on how long disruption around the Strait of Hormuz persists and where oil prices settle. The available economic data do not support attributing the current performance of major economies entirely to the US-Iran conflict. They do, however, show a common pressure running through them: more expensive energy.
The longer that pressure lasts, the greater the likelihood that what began as a military confrontation in West Asia will be felt through household fuel bills, trade balances, inflation and economic growth far beyond the region.
