| Fishermen in the port of Tyre in southern Lebanon. Daniel Berehulak/The New York Times |
The world economy will never be the same
Few corners of the world economy have been left untouched by the past four months of war.
When Iran closed the Strait of Hormuz, Middle East energy exports dried up practically overnight. Oil and gas prices exploded. Inflation surged.
The economic fallout has taken the form of energy rations in Asia, fertilizer shortages in Africa and grounded planes in Europe. It has affected politics, too. President Trump is not the only leader whose ratings have fallen as voters despair about the cost of living.
The huge toll of this war is one of the main reasons Trump has been so eager to end it. It’s also one reason to think the current deal could lead to long-term peace: Many are desperate for this to be over.
But bringing a global economy back online after it has been operating at reduced speed for months is not going to be easy — or fast. As my colleague Patricia Cohen writes, expect the economy to be “kicked onto a path of lower growth and higher prices” for some time to come.
Trust and logistics
When the preliminary agreement to open the Strait of Hormuz and lift the U.S. blockade was announced, the relief in markets was immediate. Oil prices fell to their lowest levels since early March.
But as my colleague Rebecca Elliott writes, getting substantial amounts of oil and gas actually flowing again will take a lot longer.
In the best of times, it can take weeks or months to get oil and gas from wells in the Middle East to buyers in China or Japan, and these are far from the best of times.
| An oil tanker docked at the Port of Fujairah, in the United Arab Emirates. Amr Alfiky/Reuters |
The strait is not yet open. There are concerns that it could be mined. When it does open, the first step will be getting out the hundreds of stranded vessels. That process alone could take weeks, U.S. officials say.
The next step — firing up oil wells, refineries and other infrastructure that have been idle for months — is another difficult task. Fixing any infrastructure that was damaged in the war will take even more time, and money.
For any of this to happen, energy producers in the Gulf need to trust that the U.S.-Iranian deal will last. The best-case scenario for finding a new equilibrium, Wael Sawan, the chief executive of Shell, told Rebecca, is six to 12 months.
But restarting energy shipping isn’t just about getting trapped ships out through the Strait of Hormuz. It’s also about persuading shipping companies to come back in — and shipping executives are perhaps even more uneasy than energy executives. One told my colleague Jenny Gross it would take weeks or even months for him to feel comfortable sending ships into the Persian Gulf again.
A new global economy
If the U.S. and Iran eventually reach an agreement that enough parties have faith in, there’s a good chance that energy infrastructure in the Middle East will eventually be rebuilt and that shipping will eventually rebound.
But the war has altered the global economic order in ways that already look permanent, or at least enduring.
The cost of shipping may have permanently gone up. Iran wants to impose fees on ships that pass through the Strait of Hormuz, Patricia wrote. And the fact that it has demonstrated its power to disrupt shipping raises insurance costs.
The energy shock of the past four months is also “supercharging the hunt for alternatives” to Middle East oil and gas, as Patricia put it. A push toward renewables looks likely to benefit China, the world leader in producing wind turbines, batteries and solar panels. Russia, the second-largest producer of crude oil and gas after the U.S., has gotten a boost. And countries like Brazil, Venezuela, Colombia, Argentina and Guyana are all ramping up their oil production capacities.
The Gulf, a wealthy region that includes major global trade and financial hubs, may never be the same. Attacks on five-star hotels and airports have shaken its image as a beacon of stability in a volatile region.
Perhaps most importantly for many households, the world economy is no longer on the path it was on at the start of 2026. Back then, Patricia writes, economists were thinking about upgrading their forecasts for the year. “Inflation was coming down, growth was picking up,” the World Bank’s chief economist, Indermit Gill, said.
Now, central banks around the globe are raising interest rates to combat inflation. The World Bank just downgraded its global growth outlook. A year that started out promising looks likely to be painful. And that’s if the deal holds.