How the US-Iran-Israel War Is Disrupting Global Trade, Oil Prices, and Shipping Costs

The escalation of conflict between the United States, Israel, and Iran in early 2026 has triggered one of the most serious geopolitical shocks to the global economy in recent years. Beyond military consequences, the war is already reshaping global trade flows, driving oil prices upward, and sharply increasing shipping and insurance costs, impacting the global trade data. 

The crisis is centered on the Persian Gulf and surrounding trade routes, including the Strait of Hormuz and the Red Sea, two maritime chokepoints critical to global commerce. Because these routes carry massive volumes of oil, liquefied natural gas (LNG), and manufactured goods, even a short disruption can ripple across global markets.

This article explores how the US-Iran-Israel war & conflict are affecting three interconnected pillars of the world economy: energy markets, international shipping, and global supply chains. Using current data and expert analysis, it explains why the economic consequences could persist long after the fighting ends.

Iran’s Trade With the US and Israel Before the War: Why Direct Trade Was Limited but Strategic Risks Were Huge

To understand the economic stakes of the current US-Iran-Israel conflict, it is important to examine the trade relationships between these countries before the war. Interestingly, the direct economic ties between Iran and its two adversaries were already extremely limited due to decades of political tensions, sanctions, and diplomatic hostility, according to the Iran trade data.

However, even limited trade flows and indirect economic links still played a role in the broader global economic system.

1. Iran–US Trade: Small but Persistent

Despite decades of sanctions and political confrontation, the United States and Iran maintained small but measurable trade flows, mostly involving humanitarian goods, agricultural products, and limited services.

According to official U.S. trade data:

• Total U.S.–Iran goods & services trade reached about $838.4 million in 2025.

• Goods trade alone was about $59 million.

• The United States exported $58.5 million worth of goods to Iran, while imports from Iran totaled about $1.4 million, as per the US import data. 

This created a U.S. trade surplus of roughly $57 million in goods.

Most US exports to Iran consisted of items allowed under sanctions exemptions, such as:

• agricultural commodities

• medical equipment and pharmaceuticals

• humanitarian supplies

Iranian exports to the United States were extremely limited and mostly included small volumes of:

• carpets

• artworks and handicrafts

• spices and specialty food products.

In global trade terms, this relationship was insignificant. Iran ranked 173rd among U.S. export destinations and 206th among import sources, highlighting how sanctions had already decoupled the two economies.

However, the strategic importance of the relationship was never about trade volume. Instead, it centered on energy markets and geopolitical influence. The United States plays a dominant role in global financial systems, shipping insurance, and sanctions enforcement. Because of this influence, U.S. sanctions significantly affect Iran’s ability to trade with other countries.

For example:

• Iran exported about $35 billion worth of oil annually, largely to Asian markets such as China.

• Many of these shipments relied on complex sanction-evasion tactics, including ship-to-ship transfers and disguised tanker movements.

This means that even though direct U.S.–Iran trade was small, American economic policy had a massive indirect impact on Iran’s global trade.

US-Iran Trade in the Last 5 Years: Historical Trade Data

2. Iran–Israel Trade: Essentially Non-existent

Trade between Iran and Israel was even more limited.

Since the 1979 Iranian Revolution, the two countries have had no formal diplomatic or economic relations. Iran does not recognize Israel as a state, and both countries have maintained strict trade restrictions. US involvement in Israel-Iran conflict also made the trade difficult. 

As a result:

• Direct bilateral trade between Iran and Israel is effectively zero.

• Businesses in both countries are prohibited from commercial exchanges.

However, this was not always the case.

During the 1950s–1970s, under the Iranian monarchy, Iran & Israel maintained relatively close economic and security ties. Iran even recognized Israel in 1950, and the two countries cooperated in sectors such as energy and agriculture.

After the Islamic Revolution in 1979, those relations collapsed.

Since then, any economic interaction has occurred indirectly through third-party countries. For example:

• Iranian goods may reach Israeli markets via intermediaries in Europe or Asia.

• Israeli technology or products may enter Iran through regional trade networks.

However, these indirect flows are extremely difficult to quantify and are generally considered marginal.

3. Iran’s Real Trade Partners Before the War

To understand why the war matters economically, it helps to look at Iran’s actual trading partners.

Iran’s trade is heavily concentrated in a few countries:

• China: Iran’s largest trading partner and main oil buyer

• Turkey: a major regional trading partner

• India: a key importer of Iranian goods and exporter of agricultural products

• Germany & other EU countries: limited but strategic trade in machinery & chemicals

For example:

• China alone imported around $22 billion worth of Iranian goods in 2022, much of it crude oil.

• Iran’s total trade reached about $153 billion in 2023, including $86.8 billion in exports.

These figures show that Iran’s economy depends far more on Asian and regional markets than on Western economies.

4. Why the War Still Disrupts Global Trade

Given that Iran has minimal trade with the United States and Israel, a key question arises:

Why does this war still disrupt global trade so heavily?

The answer lies in geography and energy infrastructure. Iran sits at the entrance of the Strait of Hormuz, the world’s most critical oil shipping corridor. Around 20% of global oil supplies pass through this narrow waterway. Even if Iran trades little with the U.S. or Israel directly, a conflict involving these countries can disrupt:

• Gulf oil exports

• tanker shipping routes

• maritime insurance markets

• global fuel supply chains

In other words, the economic impact of the war is driven not by bilateral trade volumes but by control over strategic trade routes and energy supplies.

5. Trade Collapse During Wartime

Early economic data suggests the conflict is already hitting Iran’s trade performance. During a previous escalation with Israel, Iran’s non-oil exports fell by 34% in a single month, highlighting how quickly geopolitical conflict can disrupt trade flows.

Imports also dropped sharply as shipping routes became riskier and insurance costs surged. These patterns are now repeating on a larger scale as the current conflict expands to involve the United States.

Why the Strait of Hormuz Matters to the Global Economy

At the center of the current crisis lies the Strait of Hormuz, one of the world’s most important maritime chokepoints. Roughly 20% of global oil and gas supplies pass through this narrow waterway between Iran and the Arabian Peninsula.

Following joint U.S.–Israeli strikes on Iran in late February 2026, Tehran retaliated by threatening and attacking shipping in the region. The result was a dramatic collapse in maritime traffic.

• Tanker traffic in the strait initially fell by about 70%.

• More than 150 ships were left waiting outside the strait due to security risks.

• Major shipping companies suspended operations entirely.

The shutdown or near-closure of this single corridor has immediate consequences because many oil exporters, including Saudi Arabia, Kuwait, Iraq, & the UAE, depend on it for nearly all of their seaborne energy exports.

Historically, disruptions in the Strait of Hormuz have triggered sharp spikes in oil prices and shipping insurance costs. The 2026 conflict is already following that pattern.

Countries Most Affected by the US-Iran-Israel War

While the military conflict is centered in the Middle East, the economic consequences extend far beyond the region. Because global trade, energy supply chains, and shipping routes are deeply interconnected, several major economies are particularly vulnerable to disruptions caused by the war.

Below are some of the countries most exposed to the economic fallout.

1. India

India is among the countries most vulnerable to rising oil prices and shipping disruptions.

Key data points:

• India imports over 85% of its crude oil needs.

• The country consumes roughly 5 million barrels of oil per day, making it the third-largest oil consumer in the world.

• A large share of this oil comes from the Middle East, including Iraq, Saudi Arabia, and the UAE.

Although India stopped importing Iranian oil after U.S. sanctions tightened in 2019, the region remains critical to its energy security. If oil prices rise above $100 per barrel, several economic pressures could emerge:

• higher inflation

• increased fuel and transportation costs

• a widening trade deficit

• pressure on the Indian rupee

Shipping disruptions in the Red Sea and Persian Gulf can also increase freight costs for Indian exporters, particularly in sectors such as textiles, pharmaceuticals, and chemicals.

2. China

China is the world’s largest importer of crude oil and one of Iran’s most important trading partners.

Before the current escalation:

• China imported around 1.2–1.5 million barrels of Iranian oil per day, often through indirect channels due to sanctions.

• Iranian oil accounted for a significant share of China’s discounted crude purchases.

China’s economic exposure includes:

• energy supply disruptions

• higher manufacturing costs

• increased shipping expenses for exports

Because China is the world’s largest exporter of manufactured goods, rising transportation costs can affect global consumer prices.

3. European Union

The European Union has significant exposure to Middle Eastern shipping routes and energy markets, as per the Europe trade data. Although Europe reduced its dependence on Middle Eastern oil in recent years, the region still relies heavily on maritime trade passing through:

• the Red Sea

• the Suez Canal

• the Mediterranean shipping corridor

Approximately 40% of trade between Asia and Europe passes through the Suez Canal. If ships avoid the Red Sea and take longer routes around Africa, European importers face:

• longer delivery times

• higher freight costs

• supply chain delays

Industries such as automotive manufacturing, electronics, and retail are particularly sensitive to these disruptions.

4. Japan and South Korea

Both Japan and South Korea depend heavily on Middle Eastern energy imports.

For example:

• Japan imports around 90% of its oil from the Middle East.

• South Korea imports roughly 70% of its crude oil from Gulf producers.

Any disruption in tanker traffic through the Strait of Hormuz can therefore pose a major risk to their energy supply chains. Higher oil prices also increase electricity generation costs, which can affect industrial competitiveness.

5. Gulf Economies

Countries in the Gulf region face a different kind of risk.

Major oil exporters such as:

• Saudi Arabia

• Kuwait

• the United Arab Emirates

• Qatar

benefit from higher oil prices in the short term. However, prolonged instability can damage their export infrastructure and shipping routes. If the Strait of Hormuz becomes unsafe for commercial shipping, even oil-producing nations could face severe export disruptions.

Oil Prices Are Rising Rapidly

One of the most immediate economic effects of the conflict has been a surge in global oil prices.

Within days of the attacks:

• Brent crude oil jumped by roughly 10–13%, reaching about $82 per barrel, its highest level in more than a year.

• Analysts warn that if the conflict continues or shipping remains disrupted, oil could exceed $100 per barrel.

Several factors are driving the price surge:

1. Supply Risk

Energy exports from the Middle East have slowed because tankers cannot safely pass through the Gulf. Attacks on ships and energy infrastructure have further tightened supply.

2. Production Disruptions

Iran’s retaliatory strikes targeted energy infrastructure across the region. Even limited damage forces producers to halt operations temporarily for security reasons.

3. Market Fear

Energy markets react strongly to geopolitical risks. Traders often price in worst-case scenarios, such as a prolonged closure of Hormuz or attacks on oil fields. The result is volatility across energy markets, including crude oil, diesel, and jet fuel.

Diesel and Fuel Costs Are Spiking

The effects are already visible in fuel markets, especially diesel, which is essential for transportation, agriculture, and manufacturing. The impact of Israel-Iran Conflict on US diesel prices is showing an increase. 

In the United States:

• Diesel prices surged to $4.04 per gallon, the highest level in nearly two years.

• Futures markets suggest prices could climb to $4.25–$4.45 per gallon, depending on how the conflict evolves.

Diesel is particularly vulnerable because Gulf crude produces a high proportion of distillate fuels such as diesel and jet fuel.

The region also accounts for:

• About 10% of the global seaborne diesel supply

• Nearly 20% of global jet fuel shipments

Any disruption in these supplies raises transportation costs worldwide, which eventually affects consumer prices.

Shipping Routes Are Being Rerouted

Another major economic consequence is the disruption of global shipping routes.

After Iranian warnings to merchant vessels & attacks on tankers, several major shipping companies, including Maersk, halted operations through the Gulf and nearby sea lanes. In response, shipping firms are rerouting cargo ships away from the Red Sea and Persian Gulf.

The alternative route is far longer:

• Ships travel around the Cape of Good Hope in southern Africa.

• This adds 10–15 days to many shipping journeys.

• Fuel costs and crew expenses increase significantly.

These longer routes also reduce the efficiency of global shipping networks, creating congestion and delays at major ports.

Shipping Costs and Insurance Premiums Are Soaring

Shipping companies must now deal with another financial burden: war-risk insurance. Insurers have become reluctant to cover ships operating in the Persian Gulf because of the threat of missile attacks, drones, and mines. Some insurers have cancelled war-risk coverage entirely in the region. For ships that can still obtain insurance, premiums have surged dramatically.

In previous Middle East crises, war-risk insurance could rise from:

• Around 0.05% of a ship’s value

• To 0.5% or higher

For a large oil tanker worth $100 million, that increase translates into hundreds of thousands of dollars per voyage. These costs are typically passed on to customers through higher freight rates.

Global Trade Routes Are Under Pressure

The conflict is also affecting global trade routes beyond the oil market.

Many goods shipped between Asia and Europe travel through the Red Sea and the Suez Canal. With renewed security threats in the region, exporters are reporting delays and higher costs.

For example:

• Exporters warn of shipment delays and rising freight costs along Red Sea routes.

• Increased insurance and security requirements are adding additional expenses.

For industries that rely on just-in-time supply chains, such delays can cause major disruptions.

Supply Chains Are Facing New Bottlenecks

The war is hitting global supply chains at a time when they are still recovering from pandemic-era disruptions.

Several sectors are especially vulnerable:

Energy and Chemicals

Petrochemicals and plastics depend heavily on Middle Eastern oil and gas. Price increases can ripple across manufacturing.

Electronics

Many components used in electronics manufacturing travel from Asia to Europe via the Suez Canal. Longer routes increase lead times.

Automotive Manufacturing

Car production relies on global supply chains with tight delivery schedules. Shipping delays can halt assembly lines.

Agriculture and Food

Higher diesel prices increase costs for farming, food transport, and fertilizers. Analysts warn that prolonged disruptions could lead to higher global inflation.

Financial Markets Are Reacting

The war has also triggered volatility across global financial markets.

When the conflict escalated:

• European stock markets dropped, including the FTSE 100, which fell around 1%.

• Airline stocks declined due to flight cancellations and higher fuel costs.

• Gold prices rose about 2.5% as investors sought safe-haven assets.

Defense & energy stocks moved in the opposite direction, as investors expect increased demand for military equipment and higher oil profits. Such market movements highlight the deep link between geopolitics and financial stability.

Airlines and Air Cargo Are Also Affected

The conflict has disrupted aviation across the Middle East. Airspace closures in several Gulf countries forced airlines to cancel or reroute flights. This affects both passenger travel and air cargo.

Air trade is critical for:

• high-value electronics

• pharmaceuticals

• perishable food products

When air routes become longer or unavailable, logistics companies must shift cargo to slower sea routes, adding further pressure to shipping networks.

Countries Dependent on Energy Imports Face the Biggest Risk

Many countries rely heavily on Middle Eastern oil imports. For them, the economic consequences could be severe. India, for example, imports over 80% of its crude oil, much of it from Gulf producers. Rising oil prices could worsen inflation and widen trade deficits.

Similarly vulnerable regions include:

• Japan

• South Korea

• the European Union

• emerging economies across Asia and Africa

For these countries, energy price shocks can quickly translate into higher transportation costs, food prices, and overall inflation.

Could Oil Reach $120 or More?

Energy analysts are modeling several scenarios. According to financial institutions and market experts:

Scenario 1: Limited Conflict

• Oil stabilizes between $80–$90 per barrel

• Shipping costs remain elevated but manageable

Scenario 2: Continued Disruptions

• Oil exceeds $100 per barrel

• Freight rates surge globally

Scenario 3: Strait of Hormuz Fully Closed

• Oil could spike to $120–$150 per barrel

• Global recession risks rise sharply

These projections highlight how dependent the global economy remains on secure maritime energy routes.

The War Could Trigger a New Supply Chain Crisis

The world has already experienced several supply chain shocks in the past decade:

• the COVID-19 pandemic

• the Russia-Ukraine war

• Red Sea shipping attacks

The US-Iran-Israel conflict threatens to add another major disruption.

Global supply chains rely on predictable shipping routes, stable energy prices, and low transportation costs. When any of these factors change suddenly, businesses must adapt quickly.

Companies may respond by:

• diversifying suppliers

• increasing inventory buffers

• shifting production closer to home markets

However, such adjustments take time and investment.

Long-Term Economic Implications

If the conflict persists, several long-term trends could accelerate.

1. Energy Market Diversification

Countries may accelerate investments in renewable energy or alternative suppliers to reduce dependence on Middle Eastern oil.

2. Strategic Shipping Routes

Governments and companies may invest more heavily in alternative trade corridors.

3. Higher Defense Spending

Rising geopolitical tensions often lead to increased military budgets, affecting public finances.

4. Persistent Inflation Risk

Higher energy and transportation costs feed into almost every sector of the economy.

Key Highlights: US-Iran-Israel War and Its Impact on Global Trade

• The 2026 US-Iran-Israel war is creating major economic disruptions, affecting global trade flows, oil markets, and international shipping networks.

• The crisis is centered around the Persian Gulf and the Strait of Hormuz, a key maritime chokepoint through which around 20% of the world’s oil supply passes.

• Direct trade between Iran and the United States was minimal before the war, totaling about $59.9 million in 2025, with the US exporting mainly humanitarian goods such as agricultural products and medical supplies.

• Iran and Israel have virtually no direct trade, as diplomatic and economic relations have been suspended since the 1979 Iranian Revolution.

• Iran’s real trade partners include China, Turkey, India, and several EU countries, with China importing roughly $22 billion worth of Iranian goods in 2022, mostly crude oil.

• Tanker traffic in the Strait of Hormuz dropped by nearly 70% after the escalation, leaving over 150 vessels waiting outside the corridor due to security risks.

• Global oil prices surged by 10–13%, pushing Brent crude close to $82 per barrel, with analysts warning prices could exceed $100 or even $120 if the conflict escalates further.

• Rising fuel costs are already visible in the US, where diesel prices climbed to $4.04 per gallon, the highest level in nearly two years.

• Shipping companies are rerouting cargo vessels around the Cape of Good Hope, adding 10–15 days to delivery times and increasing fuel and operational costs.

• War-risk insurance premiums for shipping have surged sharply, in some cases increasing from 0.05% to over 0.5% of a vessel’s value, significantly raising freight costs.

• Major global economies most affected include India, China, the European Union, Japan, and South Korea, largely due to their heavy dependence on Middle Eastern oil imports.

• Supply chains across industries such as energy, electronics, automotive manufacturing, and agriculture are facing delays and higher costs due to shipping disruptions.

• If the Strait of Hormuz were fully closed, oil prices could potentially reach $120–$150 per barrel, increasing the risk of a global economic slowdown.

Conclusion and Final Verdict

The US-Iran-Israel war has already sent shockwaves through global markets. What began as a regional military conflict is rapidly evolving into a worldwide economic challenge. Disruptions in the Strait of Hormuz, rising oil prices, soaring shipping insurance costs, and rerouted trade routes are reshaping global commerce in real time. Energy markets are volatile, supply chains are under pressure, and businesses across the world are bracing for higher transportation costs.

Because modern economies are deeply interconnected, even a localized conflict can have global consequences. As the situation continues to evolve, the world’s attention will remain focused on the Middle East, not only for security reasons but also for the future of global trade and energy stability. If tensions escalate further or shipping routes remain disrupted, the economic impact could extend far beyond the region, affecting everything from fuel prices at the pump to the cost of everyday goods worldwide.

Note for Our Readers

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