Six months into the ongoing conflict involving the US, Israel, and Iran, the anticipated economic fallout has not fully materialized. While the war has driven up energy and food prices, disrupted travel and trade, and strained supply chains, financial markets have shown resilience. Oil prices surged after military actions began on February 28, with Brent crude rising from around $72 a barrel to nearly $120 at its peak, although prices have since eased but remain elevated.
Financial markets have rebounded sharply from initial declines. The Dow Jones, S&P 500, and Nasdaq have all posted significant gains since late March, buoyed by optimism surrounding artificial intelligence. The International Monetary Fund noted in July that the global economy is influenced by two opposing forces: the war’s negative impact on growth and the positive momentum from AI advancements.
The economic effects of the conflict have been uneven. Increased energy and transport costs have burdened airlines, consumers, and farmers, while rising fertilizer prices have raised concerns about food security. Conversely, the crisis has accelerated interest in electric vehicles and renewable energy sources.
Winners
Investors Who Stayed Calm
Global stock markets initially reacted negatively to the conflict, with the Dow and Nasdaq entering correction territory. However, since late March, the Dow has gained nearly 19%, the S&P 500 almost 22%, and the Nasdaq about 27%. This recovery suggests that investors have largely overlooked the war’s economic disruptions, driven by strong expectations around AI.
Clean Energy and Electric Vehicles
The disruption in oil supplies and rising fuel prices have bolstered the case for reducing reliance on fossil fuels. Electric vehicle sales have surged, with increases of 110% in Singapore, 180% in New Zealand, and 300% in Colombia. The International Energy Agency projects that EVs will account for 29% of global vehicle sales by 2026.
US Defence Contractors
The conflict has increased demand for military equipment and technology. Companies involved in missile defense, drones, and other military systems have secured contracts linked to the US response. Notably, Military contractor Powerus, associated with members of Donald Trump’s family, has obtained a US Air Force contract worth up to $90 million for interceptors. Other companies benefiting include SpaceX and Firehawk Defense, which have secured Pentagon contracts.
Losers
Airlines and Travellers
The transport sector has been significantly impacted, with higher oil prices leading to increased fares and fuel surcharges. Airlines have raised prices and reduced flight options due to soaring fuel costs. The International Air Transport Association anticipates jet fuel prices will average 70% higher in 2026 compared to 2025.
Farmers and the Fight Against Hunger
Higher energy costs have driven up fertilizer prices, adding pressure on farmers and raising food security concerns. Fertilizer prices peaked in April at 44% above pre-war levels, prompting some farmers to cut back on usage, which could affect future crop yields. The UN World Food Programme has warned that rising food and transport costs could push millions more towards hunger.
Consumers and Import-Dependent Economies
The rise in oil prices has broader implications beyond transportation costs. Increased energy costs affect the prices of manufactured goods, food, and other consumer products. Countries reliant on oil imports from the Persian Gulf face heightened exposure to these disruptions, while higher shipping and insurance costs further strain global trade.
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