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Iran war’s economic toll pushes major powers toward damage control

Published: 02 Apr. 2026, 00:04

Hao Nan

The author is a research fellow with the Charhar Institute and a 2025 Korean Peninsula specialist fellow with the National Committee on American Foreign Policy,

When the White House reinstated U.S. President Donald Trump’s Beijing trip for May 14 and 15 after delaying it because of the Iran war, it showed that the diplomatic calendar is starting to bend around the costs of a conflict that no major power can fully control. Around the same time, the Kremlin announced that Russian President Vladimir Putin would also visit China in the first half of the year. That overlap does not prove coordination on Iran, but it suggests that Washington, Beijing and Moscow are all being pushed by the same reality: This war is no longer only military. It is increasingly economic and global, and harder to sustain at an acceptable price.

Plumes of smoke and fire rise after debris from an intercepted Iranian drone struck an oil facility in Fujairah, United Arab Emirates, on March 14. [AP/YONHAP]

Iran’s leverage comes from a set of endowments few states possess in combination. It sits beside the Strait of Hormuz, through which flows about one-fifth of global oil consumption and a similar share of the liquefied natural gas (LNG) trade. It also faces the waterway from a steep coastline suited to dispersed launch points and concealment. Iran also has the tools that magnify chokepoint power: drones, missiles, floating mines and easy access from rugged coast to narrow sea lanes. It does not need to defeat the United States or Israel conventionally. It only needs to make maritime normality expensive, uncertain and politically difficult to restore.

That is why Tehran’s economic warfare should be taken seriously as strategy. Its targets have been the world economy’s most sensitive Gulf nodes: energy, shipping, export infrastructure and industrial facilities. Iranian attacks have cut into Qatar’s LNG capacity and exposed how a regional strike can spill into critical markets. Qatar produces nearly one-third of the world's helium supplies, and prices have surged as gas disruption has spread into semiconductor, aerospace and medical supply chains.

The damage does not stop at oil and gas. The war is also choking petrochemical flows through Hormuz, a route through which tens of billions of dollars in goods normally pass each year. Asia’s naphtha refining margins have jumped sharply, while some downstream buyers are already facing steep price increases.

Fertilizer is another transmission belt. A large share of traded fertilizer moves through Hormuz, and urea prices have risen significantly, threatening a broader food-price shock across vulnerable importers. Add in attacks on Gulf aluminium facilities, the cancellation of war-risk cover and ships stranded near Hormuz, and the picture is clear: Iran is not only pressuring energy markets. It is striking at the foundations of manufacturing, food security, freight and inflation.

The crucial issue is time. The global economy can absorb weeks of pain. It is much less able to absorb months of high-intensity disruption. The International Energy Agency has already launched a massive emergency stock release, while warning that supply-side measures alone cannot offset the current shock, and that restoring transit through Hormuz remains essential. Shipping companies are making a similar point. The conflict is imposing weekly losses that are not sustainable. Growth forecasts have been cut, and business activity in major economies is coming under pressure as inflation expectations rise.

This is why the great-power calculus is shifting. For China, the strategic upside of a United States distracted from the West Pacific is limited, while the economic downside is larger. Even with diversified energy sources, it cannot welcome a war that raises shipping uncertainty and weakens external demand. Its gains are indirect. Its losses are direct.

The United States also has some short-term gains, but they are narrower than they appear. Militarily, it may still seek to weaken Iran further. Commercially, higher energy prices benefit some firms. But the broader national picture is less favorable. The war complicates domestic politics and fuels inflation expectations. What Washington cannot do cheaply is raise the cost for Iran without also raising it for its own consumers, markets and allies.

Luojiashan tanker sits anchored in Muscat amid the U.S.-Israeli conflict with Iran, in Muscat, Oman, on March 7. [REUTERS/YONHAP]

Russia remains the clearest short-term beneficiary. Higher energy prices boost its revenues. But even Russia’s advantage is not open-ended. If the war slows global growth, it weakens the very demand on which those gains depend.

The emerging pattern is not a coordinated alignment among the three powers. It is something narrower: parallel efforts to limit losses by countries that still distrust one another but are converging on the view that the economic costs of prolonging the war are rising.

A limited form of coordination is therefore not impossible. Russia has reasons to support Iran, but lacks the economic leverage to manage the crisis alone. China holds economic influence over Iran and relationships in the region, while also maintaining channels with the United States.

Washington, meanwhile, needs a way out. The longer the war lasts, the harder it becomes to manage domestic political pressures. Yet the positions of the United States and Iran still barely overlap, making a bilateral breakthrough difficult. Iran would likely require credible assurances before accepting de-escalation, given its vulnerability to renewed attacks.

Iran’s real leverage is not that it can win a conventional war. It is that it can use geography, asymmetric tools and global dependence on Gulf chokepoints to make the economic cost of defeating it intolerable for longer than others can comfortably bear. Great powers can exploit disorder for a time. They are much less able to live within it.

HAO Nan is a research fellow with the Charhar Institute and a Nuclear Futures fellow (2025-2026) with the Ploughshares Fund & Horizon 2045. He previously served at East Asian intergovernmental organizations such as the Trilateral Cooperation Secretariat (for China, Japan and Republic of Korea) in Seoul and the ASEAN-China Centre in Beijing.