Overview
As higher oil prices disrupt supply chains, the widespread economic shock across the world highlights how fragile and connected the global system is.
Warflation
The war between the United States and Iran is affecting more than battlefield zones in the Gulf. Although the conflict is focused on the Strait of Hormuz, its impact is being felt in everyday places like American grocery stores and farms, households, and small businesses in India.
Rising energy costs are driving fuel prices higher and making it more expensive to move goods and run operations. Those costs are being passed on to consumers who are now paying more for fuel, transport, food, and other goods, putting pressure on both households and businesses in different parts of the world.
At a briefing hosted on April 17 by American Community Media, economic and policy experts examined how the US–Iran war is contributing to “warflation” and increasing uncertainty for consumers. As higher oil prices disrupt supply chains, the widespread economic shock across the world highlights how fragile and connected the global system is.
Why Sanctions Falter
Sanctions have not broken the current stalemate, and part of the reason lies in how Iran sees itself, said Dr. William Orman Beeman, Professor Emeritus of Anthropology at the University of Minnesota, who specializes in the Middle East. He explained that beyond military actions, Iran’s leadership has been shaped by a long history of foreign interference that has led to a focus on national sovereignty. Iran’s 1979 Revolution expressed this sense of nationhood, of being “neither East nor West,” and staying independent from outside control
That need for autonomy determines how Iran responds to pressure, explained Dr. Beeman. While U.S. efforts at “economic coercion” are meant to force policy changes, Iranian leaders are using resistance to protect and maintain their country’s independence. “No amount of economic coercion, no amount of military coercion is going to deter the Iranian government from this major goal… they will go to the mat in order to be able to protect themselves,” he emphasized.
Even though the United States is using sanctions as a bargaining tool, offering relief in exchange for limits on nuclear activity, Iran sees the sanctions as a challenge to its right to be an “equal partner” in the international system. The gap in understanding widens when U.S. officials use what Dr. Beeman calls “civilizational” or biblical language, which Iran interprets as hostile, reinforcing their sense of external threats. These opposing interpretations make diplomacy difficult, explained Dr. Beeman.
Resilience vs Inequality
The U.S. economy has reacted to the conflict with a contradiction of overall stability, said Dr. Ryan Nunn, Director of Research for the Budget Lab at Yale. When oil prices rose from about $65 to $100 per barrel during the height of the conflict, the economy held up better than in the 1970s. This resilience is partly because cars and industries use fuel more efficiently now, explained Dr. Nunn, and because the U.S. now produces more of its own energy through fracking; it has become a net exporter of petroleum.
But this stability does not reflect the rising costs that ordinary people face in their daily lives. “This kind of inflationary shock hits lower-income households especially hard,” he added. “They tend to spend more on goods… as a share of their budgets, than higher income households do”.
Wealthier households can absorb higher costs or adjust to alternatives more easily than people without a savings buffer, who face real strain, experiencing a direct reduction in their quality of life due to the conflict. This disparity, said Dr. Nunn, reflects the uneven effects of war.
The Global Toll: India
The effects are most severe in developing countries such as India and Africa. For these economies, disruption in the Strait of Hormuz is not just a financial issue but one that affects basic needs.
India relies heavily on the Persian Gulf for energy, including nearly 50% of its natural gas and about 90% of its LPG, which is used for cooking. Petroleum is used not only for fuel but also in fertilizers, plastics, and pharmaceuticals, making it central to everyday life. This creates a “double squeeze” on vulnerable households, as both household energy and food production costs are affected at the same time.
According to AP News, the energy crisis is pushing some households back to using charcoal and firewood, as cleaner fuels like LPG become more expensive or harder to access.
In India, the world’s second-largest LPG importer, some households are struggling to maintain access to LPG as energy costs rise.
In Bhalswa, on the outskirts of New Delhi, waste-picking families with incomes below $3 a day can no longer afford LPG cylinders, says Rama, a social worker. Some are returning to stoves that burn firewood, while others are moving back to villages where wood is easier to collect. “Things are very, very bad,” she said.
In cities, the strain is visible. Many workers in the informal sector, such as rickshaw drivers and street vendors, who make up 60–70% of the labor force, have seen about 20% of their income disappear as higher costs make it harder to operate.
Reversing gains in progress
Neha Saigal of Asar Social Impact Advisors told AP News that this change is also affecting daily life, especially for women and girls who often spend hours gathering fuel instead of working or attending school. “Years of work went into making LPG aspirational. But a global issue like this can reverse some of those gains.”
While undoing earlier progress toward cleaner cooking methods promoted for health and environmental reasons, the shift is also weakening conservation efforts in forests and wildlife habitats, said Mayukh Chatterjee of the International Union for Conservation of Nature. Reducing the use of fuelwood has been an important part of protecting forests and wildlife in parts of Asia. But as more households go back to firewood, those gains are diminishing. “That all risks going back to square one.”
At the briefing, Dr. Anil Deolalikar, Professor of Economics at UC Riverside, explained that in rural areas of India, the impact is especially severe for small farmers who already live close to subsistence. Fertilizer and diesel prices have risen “incredibly,” increasing their costs and debt levels. This has raised concern about higher rates of farmer suicides, a long-standing issue made worse by global price shocks.
This shows ‘the long tail’ of economic warfare, noted Dr. Deolalikar, that causes long-lasting damage such as‘reverse’ migration from cities back to rural areas and malnutrition caused by higher food prices. Even if oil prices fall, their social consequences will take years to repair.
“Some of the damage to the poorest countries… has already been done, and we may not be able to undo it as quickly.”
