Displaced people make their way back to their homes as they cross the bridge linking southern Lebanon to the rest of the country, which was hit earlier in an Israeli strike, after a 10-day ceasefire between Lebanon and Israel went into effect, in Qasmiyeh, Lebanon, April 17, 2026. / REUTERS/Louisa Gouliamaki

A sharp escalation in tensions between the United States and Iran has unleashed a global economic ripple effect, sending oil prices soaring and pushing up the cost of everyday goods, from groceries to fuel, across continents. The world may be entering a prolonged phase of “warflation,” where conflict-driven energy shocks translate into sustained inflation for consumers.

Gathered around the American Community Media briefing table Dr. William Beeman, Professor Emeritus of Anthropology at the University of Minnesota, Dr. Anil Deolalikar, Professor of Economics at UC Riverside and Dr. Ryan Nunn, Director of Research for the Budget Lab at Yale, warned that the Iran conflict may result in high consumer food prices that are broad, lagged and sticky. 

An Energy Shock With No Easy Escape

Unlike typical food inflation, where consumers can switch to cheaper alternatives, this crisis strikes at the foundation of the entire supply chain. As Ryan Nunn, Director of Research at the Budget Lab at Yale, explained, energy costs are embedded in nearly every stage of production and distribution.

Diesel fuels transportation. Petrochemicals form packaging. Natural gas powers refrigeration and processing. Even agriculture depends heavily on fuel and fertilizer, both tied to oil prices. The result is a synchronized rise in costs across nearly all food categories.

“There is no meaningful ‘non-energy’ substitute,” Nunn noted. “When energy prices rise, everything rises.”

Research across advanced economies reinforces this link: spikes in energy inflation consistently drive food inflation, particularly in countries heavily dependent on imported fuel. The current disruption, affecting oil, liquefied natural gas, and refining inputs simultaneously, is amplifying that effect.

A Shock Felt at the Checkout Counter

In the United States, oil prices surged from roughly $65 to $100 per barrel in a matter of weeks, one of the steepest increases in decades. According to Nunn, if sustained, such a shock could push core inflation higher while shaving economic growth.

Though the U.S. economy is more resilient than in the 1970s, thanks to improved energy efficiency and domestic production, the burden on households is already visible. Recent inflation data shows a sharp uptick, driven largely by energy-related costs.

Lower-income households are being hit hardest. They spend a larger share of their income on essentials like fuel and food, have fewer substitution options, and lack savings buffers to absorb price shocks.

“These impacts are real and immediate,” Nunn said, “even if they are smaller than historic oil crises.”

Global Fallout: A Crisis for the Most Vulnerable

The consequences are far more severe in developing economies. Anil Deolalikar, a professor at the University of California, Riverside, warned that the crisis could deepen poverty and food insecurity worldwide.

Oil is not just a fuel, it is a core input in fertilizers, plastics, pharmaceuticals, and textiles. As prices rise, so do the costs of farming and manufacturing, setting off a chain reaction that ultimately affects food availability.

In countries already on the edge, such as Yemen and Sudan, even modest increases in food prices can have life-or-death consequences.

India: A Case Study in Vulnerability

India illustrates the scale of the challenge. Heavily dependent on energy imports passing through the Strait of Hormuz, the country has been hit by sharp increases in fuel and cooking gas prices.

Liquefied petroleum gas (LPG), a staple for cooking in both urban and rural households, is now in short supply. Prices have surged dramatically, forcing many families to revert to firewood and kerosene, raising both economic and environmental concerns.

The crisis is also hitting farmers hard. Fertilizer and diesel costs have spiked just as planting seasons begin, squeezing already fragile rural incomes. Many small farmers, operating on thin margins, are facing mounting debt.

Urban informal workers, street vendors, delivery riders, and domestic workers, are also feeling the strain. With operating costs rising and demand falling, many are losing livelihoods, triggering signs of reverse migration back to rural areas.

“This is not just an inflation story,” Deolalikar said. “It’s a poverty story.”

A Slow Road to Recovery

Even if oil prices begin to stabilize, the broader economic damage may linger. Historically, energy shocks take more than a year to partially unwind. Supply chains, once disrupted, are slow to normalize.

And some impacts, rising debt, malnutrition, lost livelihoods, may persist long after prices fall.

William O. Beeman, a longtime expert on Iran, emphasized that the trajectory of the crisis will depend heavily on geopolitics. Without a deeper understanding of regional dynamics, he warned, diplomatic solutions may remain elusive.

The Bigger Picture

For now, consumers around the world are left grappling with rising bills and shrinking purchasing power. While markets may react quickly to news, sometimes even rebounding, the underlying economic forces move more slowly and can be far more enduring.

The message from economists is clear: this is not a temporary spike but a systemic shock. And until energy flows stabilize and geopolitical tensions ease, the effects of this conflict will continue to be felt, most visibly at the checkout line.

Discover more at New India Abroad.