The text below is an edited version of an Insight originally published on CRU Online, dated 17 March 2026. For the full version, contact us here.
The conflict in the Middle East has pushed energy prices and volatility sharply higher and disrupted other commodity markets, notably fertilizers and aluminium - illustrating the macroeconomic impact of conflict in the Middle East. Continued disruption would be seriously damaging for the global economy. Our analysis outlines which economies are most exposed and how effects could evolve under different scenarios.
Energy requirements are the critical factor for vulnerability
The greatest exposure comes from large net energy import requirements relative to GDP (see chart below). Many South and East Asian economies will feel the shock first as they compete for seaborne supplies, driving up global energy prices. Advanced Asian countries, and Europe, are particularly sensitive to higher import bills, with attendant currency and inflation pressures. China’s large import volumes are moderated by strategic stockpiles and a power mix that is less dependent on gas than some peers
Distributional effects will be painful even for energy producing countries
Even within countries that are net energy exporters, there will be winners and losers. Energy producers gain while energy‑intensive manufacturers and consumers lose. Europe is especially vulnerable because gas price moves feed into power costs, squeezing industry and households. In parts of Asia where coal and renewables dominate generation, power pass‑through is weaker, yet low‑income households still face higher energy burdens. Expect political pressure for consumer and industry support, which would limit immediate damage but increase fiscal strain.
Non-energy commodities also have the potential to cause economic pain
Disruption to fertilizer and aluminium supplies amplifies the shock. Higher fertilizer costs will raise food prices and impact agricultural sectors; disruption to aluminium exports will increase manufacturing and some construction costs. Chemicals and autos face compound pressures from energy, feedstock and freight. Unforeseen cross‑sector knock‑on effects are likely if disruption persists.
Scenarios and macro outcomes
A brief disruption produces a modest downgrade to global growth versus our baseline. Sustained regional disruption generates a materially larger hit and a deeper, more persistent fall in industrial output. The Gulf economies face sharp contractions from lost production and services, and prolonged disruption would reduce remittances to South Asian countries, magnifying regional spillovers.
In the longer term, this crisis will encourage spending on energy independence and defence
Even a short shock will accelerate policies and investment aimed at energy security: faster renewables deployment, greater electrification, investment to reduce reliance on seaborne routes, and higher defence spending. These shifts could support commodity demand over time, but in the near term the risks are skewed to the downside as higher energy costs raise input prices, erode demand and disrupt value chains.
We are closely tracking the macroeconomic impact of conflict in the Middle East and will continue to update our market analysis as the situation evolves. If you would like to discuss this topic further, please reach out to our team.
