Iran war revives pandemic-era shocks – and may go further

By the time this column appears, the world will feel very different from when my previous column appeared earlier this month. In just days, a conflict that some in Washington seemed to believe would quickly topple Iran’s leadership has instead become a potentially long and uncertain war, with little clarity on how or when it will end. The front lines will have shifted, more oil tankers will have been stuck at sea and more flights cancelled, and there will almost certainly have been further civilian deaths in what is, at its core, a war of choice. Events are moving faster than governments – or markets – seem able to absorb. We last felt this kind of shock in 2020, during the Covid-19 pandemic. Hong Kong, like many places, discovered how quickly an unseen threat could upend trade, travel and daily life. This time, however, the shock is man-made, radiating from the Gulf and Levant through the energy markets, shipping lanes and air routes. Where the pandemic closed borders for public health, this conflict is closing them for military and geopolitical reasons. Nowhere is this clearer than in the Strait of Hormuz. Iran’s new supreme leader has vowed to keep the strait closed to force other countries to intervene diplomatically and restrain Washington and Israel, while urging neighbouring states to shut US bases on their soil. However, Iran has reportedly allowed a limited number of ships from countries not directly involved in the conflict to transit the waterway following negotiations. Roughly one-fifth of the world’s oil passes through this narrow channel, so any major disruption affects the global economy. Shipping costs are climbing, and some vessels are detouring or waiting it out. With inflation still a concern, rising fuel and insurance costs are adding to price pressures. The focus, however, is no longer solely on the Strait of Hormuz. To force countries to lean on Washington and Israel to de-escalate, Iran has signalled that the Bab el‑Mandeb, another critical oil and trade artery, could also be drawn into the conflict. These economic shocks are unfolding amid uncertainty over Washington’s endgame. Officials are not framing the military action as war but as a path to regime change, even as officials concede air power is unlikely to be enough and do not rule out ground troops. Yet it remains unclear what the strategy becomes if the regime survives. The US president is also pressing allies to help secure tanker traffic through the Strait of Hormuz, threatening Nato and attempting to force a war-wary Europe to join the war. So far, no country has agreed to support Trump in this regard. As disruption spreads, the consequences deepen, especially in Asia. Economies from China and India to Japan and South Korea buy a considerable amount of the oil and gas that normally moves through the Hormuz, so every day of disruption tightens energy supplies, weakens currencies and threatens to reignite inflation pressures. Reduced oil supplies and higher production and transport costs are feeding directly into the price of everyday household goods, from cleaning products to food staples. The shock has severely disrupted passenger and cargo flights. Within hours of the first strikes on Iran, airspace across much of the Middle East largely emptied and airlines suspended services. Thousands of flights have been cancelled, leaving hundreds of thousands of passengers stranded worldwide. Abu Dhabi, Doha and Dubai, three of the world’s busiest transit hubs, have been heavily disrupted, with airports suffering from drone-related incidents that caused limited infrastructure damage, casualties at Abu Dhabi’s Zayed International Airport and flight suspensions while airlines curtailed or diverted services amid airspace closures, particularly in Qatar. The consequences are visible in airport terminals and rising grocery bills. International centres like Abu Dhabi, Doha and Dubai, long promoted as secure global crossroads, are facing an exodus. For many tourists, the region may simply be deemed too unsafe in the coming months or years. That raises the prospect of people leaving. If life no longer feels stable or secure, expatriates may look elsewhere. Hong Kong went through this during the pandemic, as months of uncertainty and heavy restrictions led many professionals and some multinational firms to move. Dubai and other Gulf hubs now face a comparable test if instability drags on. Taken together, these shifts mark a decisive break in the post-pandemic recovery. The war is reshaping energy flows, trade routes and political alignments, driven by US and Israeli military action, expanded American economic pressure and the responses of Iran and its neighbours in an already fragile region. The outcome is not predetermined, but the crisis may mark the start of a more dangerous phase. What happens next will depend on decisions taken in the coming weeks and months – whether leaders choose restraint and diplomacy, or slide further into escalation and fragmentation.

Iran war revives pandemic-era shocks – and may go further

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}As war in Iran quickly reshapes energy flows, trade routes and political alignments, the crisis may mark the start of a more volatile new phase

As war in Iran quickly reshapes energy flows, trade routes and political alignments, the crisis may mark the start of a more volatile new phase