Staring down the barrel of a global economic crisis

With every day that goes by, and every missile fired at Middle Eastern energy infrastructure, the chances of a full-on global recession soar.

Some argue this conflict will soon be over – in which case, the global economic impact would be muted – but I'm not betting on this war coming to a quick conclusion.

Why this war is unlikely to end soon

History shows that US involvement in Middle Eastern conflicts tends to drag on longer than initially intended – Iraq is a case in point. Countless factors are out of President Trump's control, so while he may want to find an off-ramp, that doesn't necessarily mean he will.

One of those factors is the behavior of the Iranian regime. While you might think they're now under more pressure to capitulate, in reality, they can take the pain and hang on so long as they maintain control of the Strait of Hormuz.

Indeed, even if the Iranians are willing to come to the table and negotiate in good faith, recent peace talks have proven to be long, drawn-out processes.

Of course, that process would be made even harder by the fact that it's not just the US calling the shots. Peace would also require Israel to put down their weapons, and Prime Minister Netanyahu may well come to a different conclusion as to this conflict's next steps.

From higher oil prices to inflation

In all likelihood, then, it may be some time before this war comes to an end – and to put it bluntly, that will have catastrophic economic consequences, driving the oil price higher and higher. We've already seen Brent crude reach $119 in March, and new records are surely on the way should this war continue.

Major oil crises are often followed by rampant inflation – take the 1973 oil embargo, for example – and in 2026, we're likely to see the same chain of events, potentially broadening into an all-out global recession. The impact will come hardest and fastest in Europe, where, having weaned themselves off Russian imports, countries are more exposed to volatility in global energy markets. Given their economies have already proven to be less resilient than their global counterparts, it's likely they will bear the brunt of the economic woes.

How the pain reaches businesses and households

Businesses will face higher fuel costs, forcing them to cut jobs, wind down, or pass on price hikes to consumers. Central banks will hold or hike rates, dampening spending further. Currencies will weaken as trade deficits with oil-producing countries widen.

From there, we could see a domino effect. Economic downturns easily spill across continents, and once a powerhouse like Europe falters, the repercussions will ripple out across the world.

Even the US will not escape

Big oil producers like the US are admittedly more sheltered, but as export demand dries up, global companies pull back, and financial markets fall, the US certainly won't be immune from the fallout.

How severe the global downturn becomes remains to be seen, but whichever way you look at it, economic pain may be coming.