Analysing the Economic Consequences of the US - Iran Conflict

Abstract

The long ongoing geopolitical conflict between Iran-Israel, has significantly escalated in recent times, by the direct involvement of the United States in 2026, transforming it into a major global crisis, significantly reshaping the international political and economic landscape. In this dynamic VUCA world, rising energy insecurity, disruption in the supply chains, and shifting geopolitical partnerships have increased uncertainty on a global level. The conflict highlights the vulnerability of an interconnected world. The shutdown of important trade routes such as the Strait of Hormuz and complications in oil and gas supplies have initiated a global energy crisis, rising imported inflation and economic ambiguity across nations. From a wider aspect, the conflict extends beyond a regional dispute and has evolved into a geopolitical issue involving important powers and international institutions. The conflict has significantly increased risks of nuclear spread and long-term instability, therefore reshaping international connections and global governance foundation. India, due to its economic ties with the Middle East, has both directly and indirectly been affected by this conflict. Since it relies significantly on these areas for major sourcing of crude oil and is now facing rising energy cost, inflationary pressure and external sector vulnerability. Moreover, due to dependence of other commodities like fertilizers, food stability has been impacted in the country as well highlighting the global conflict’s connection with India’s food supply. India’s strategic response reflects a balanced approach towards the crisis management and economic resilience.  The study aims to analyse the impact of US-Israel-Iran conflict on economic development of the world. The study also examines the effect of the conflict on India specifically its commercial sector as well as evaluate their risk management strategy in handling geo political conflicts.