Middle East Fires 'Scorch' the Global Economy: Survival Battle Amid the Dual Crisis of Energy and Inflation

The latest warning from the International Monetary Fund (IMF) points out that if the Middle East conflict continues to escalate, its spillover effects will pose systemic risks to the global economy through disruptions in the energy supply chain and runaway inflation expectations. This military confrontation, which began in the Strait of Hormuz, is reshaping the trajectory of global economic growth through a transmission chain of 'energy crisis—cost-push—inflation trap.'

As a maritime hub for 20% of the world's oil and 18% of liquefied natural gas (LNG), the blockade of the Strait of Hormuz has caused severe shocks in the global energy market. Brent crude oil prices surged 30% within a week to $120 per barrel after the outbreak of the conflict, and an attack on Qatar's LNG facilities caused European natural gas futures prices to spike 70% in a single day. A Morgan Stanley research report shows that the global LNG supply gap has reached 15 million tons per year, equivalent to 4% of global supply, and repairing the damaged energy infrastructure will take at least 18 months.

The permanent upward shift of energy price benchmarks is spreading along the industrial chain. Global fertilizer prices have risen 60% due to natural gas shortages, helium (a key gas for chip manufacturing) spot prices have jumped 50%, and the production halt in Qatar directly impacts the semiconductor supply chain. The head of domestic chemical leader Shenghong Holding Group admitted, 'The sharp swings in crude oil prices have expanded the volatility of downstream product prices by 300%, forcing companies to increase raw material inventories by 30% to cope with supply risks.'

The surge in energy prices has triggered a de-anchoring of global inflation expectations. According to IMF calculations, every $10 increase in oil prices per barrel will raise global inflation by 0.6-0.7 percentage points and reduce global GDP growth by 0.3%. Currently, the average Brent crude oil price remains high at $95 per barrel, up 35% compared to pre-conflict levels, which means that energy factors alone could raise the global inflation rate in 2026 by 2.5 percentage points above expectations.

Emerging markets are bearing particularly severe shocks. Economies such as India, Japan, and South Korea, where more than 70% of oil is transported through the Strait of Hormuz, are facing both imported inflation and currency depreciation pressures. Indonesia's central bank has been forced to intervene in the foreign exchange market using $40 billion in reserves, while the Indian rupee has fallen to a historic low of 85.5 per US dollar. More severely, the trend of global monetary system restructuring is accelerating — tight offshore dollar liquidity has led to a 40% increase in euro/dollar swap financing costs, and the Reserve Bank of Australia even raised interest rates by 25 basis points in March counter to the trend to curb capital outflows.

The IMF's latest World Economic Outlook outlines three scenarios: under the baseline scenario, if the conflict subsides by mid-year, global economic growth will fall to 3.1% in 2026; if the Strait of Hormuz remains closed for the long term, growth will drop further to 2.5%; in the most severe scenario, if energy supply disruptions continue until 2027, the global economy will fall into a recession range of 2% growth, with inflation exceeding 6%.

Regional differentiation is significant. The Middle East and Central Asia are hit first, with economic growth plunging from 3.6% in 2025 to 1.9% in 2026, and Qatar’s economy even experiences negative growth. Sub-Saharan Africa faces a double blow — soaring energy import costs and worsening food crises, with the IMF warning that 45 million people in the region will face food insecurity. In contrast, developed economies, benefiting from diversified energy structures and policy buffers, are expected to maintain 1.8% growth, but ECB President Christine Lagarde warned: “If Russian gas supply and Middle Eastern oil transport are simultaneously disrupted, the Eurozone will experience another energy crisis like 2021-2023.”

In this deep contest between geopolitics and economic laws, the spillover effects of the Middle East conflict are like a prism, reflecting the deep interconnection of national economic destinies in the era of globalization. When oil tankers in the Strait of Hormuz and cargo ships in the Red Sea simultaneously raise alarms, building a more resilient global economic system is no longer a choice, but a mandatory challenge concerning the survival of human civilization.