Region-by-Region Breakdown: Economic & Energy Fallout from the Israel–Iran Conflict (2025)

As the Israel–Iran conflict escalates amid an already volatile global landscape, the ripple effects are being felt in energy markets, inflation dynamics, supply chains, and geopolitical risk assessments across the world. Below is a region-by-region briefing tailored for decision-makers navigating this turbulence. 

Middle East & North Africa (MENA) 

Key Themes: Energy weaponization, production disruption, geopolitical leverage 

• Gulf States (Saudi Arabia, UAE, Kuwait): These countries are currently benefiting from elevated oil prices and hold significant spare production capacity. However, any direct attack on their infrastructure could rattle global markets and test OPEC+ cohesion. 
• Iran: Sanctions are intensifying, and Iranian energy infrastructure is under threat. With ~3 million barrels per day at risk, global supply may tighten further. 
• Egypt & Jordan: Disruptions in Israeli pipeline gas are affecting domestic energy stability and Egypt’s ability to export LNG to Europe. 
• Israel: Gas field shutdowns (like Tamar) and increasing cyberattacks on energy infrastructure are adding pressure to regional energy resilience. 

Europe 

Key Themes: Supply diversification, inflation sensitivity, policy recalibration 

• Western Europe (Germany, France, UK): LNG diversification is helping buffer the shocks, but oil volatility is reigniting inflation fears. Monetary policy flexibility is narrowing. 
• Eastern Europe (Poland, Hungary): The Russia–Ukraine war continues to drive up energy and transport costs, straining manufacturing and trade. 
• Southern Europe (Italy, Spain, Greece): Maritime logistics slowdowns and risk sentiment are beginning to affect tourism and import/export flows via the Red Sea. 
• North America Key Themes: Energy resilience, inflationary overhang, geopolitical leadership 
• United States: With strategic petroleum reserves and a strong shale base, the U.S. is better positioned, but inflation risks remain—potentially stalling interest rate cuts. 
• Canada: As an oil exporter, it may enjoy short-term revenue gains, although refined product costs in the east remain a concern. 
• Mexico: Benefiting from energy exports but simultaneously facing rising inflation and logistic cost pressures. 

Asia-Pacific 

Key Themes: High import dependency, inflation vulnerability, trade bottlenecks 

• India: Perhaps the most exposed large economy. A high dependency on energy imports and limited fiscal space make it particularly vulnerable to global oil shocks. 
• China: Focused on energy security and likely to deploy reserves to stabilize supply. Short-term strategies dominate as the country seeks to avoid price pass-through to consumers. 
• Japan & South Korea: Both are heavily reliant on LNG and are now facing increased costs and delivery risks. Currency safe-haven flows are underway. 
• Southeast Asia (Thailand, Vietnam, Indonesia): Export-oriented economies are facing margin pressure from high shipping and fuel costs. Subsidies are adding fiscal strain. 

Russia & Central Asia 

Key Themes: Sanction navigation, shadow trade, supply redirection 

• Russia: Elevated oil prices are offsetting sanctions to some extent. Export redirection to Asia (especially China and India) is increasing. 
• Kazakhstan & Azerbaijan: Critical export routes via BTC and CPC are gaining importance as companies try to bypass high-risk Gulf shipping lanes. 

Latin America 

Key Themes: Export-led growth, inflation risks, consumer pressure 

• Brazil, Argentina, Colombia: These economies are benefiting from rising global demand for food and energy exports. However, inflationary pressure and currency instability could counteract gains. 
• Chile & Peru: Copper and lithium exports are supported by strong demand, but global shipping delays and rising insurance costs are squeezing margins. 

Africa 

Key Themes: Fragile infrastructure, food & fuel inflation, geopolitical positioning 

• Nigeria & Angola: Higher oil prices offer a fiscal lifeline, but outdated infrastructure limits the ability to ramp up production. 
• South Africa, Kenya, Morocco: Rising energy and food import costs are increasing inflation, especially for energy-poor importers. Red Sea delays are pushing logistics costs higher. 
• Egypt: Suez Canal revenue is at risk due to falling vessel traffic, and LNG exports are constrained by reduced Israeli gas flows. 

Strategic Outlook Energy Markets: 

Sustained volatility is expected. Brent may remain between $90–$110/barrel if disruptions persist. 

• Monetary Policy: Central banks, especially in emerging markets, may pause or reverse easing cycles to counter imported inflation. 
• Defense & Cyber: Expect a significant rise in defense spending and cyber infrastructure upgrades in regions adjacent to flashpoints. 
• Supply Chains: Major rerouting around the Red Sea and Strait of Hormuz will raise shipping costs, insurance premiums, and delivery times across industries. 

Recommendation 

Executives should take immediate steps to: 

• Model multi-scenario energy and commodity cost impacts. 
• Reassess trade routes and logistics resilience. 
• Upgrade cybersecurity across physical and digital infrastructure. 
• Diversify sourcing away from high-risk geopolitical zones.

Conclusion

The Israel–Iran conflict has not just reignited geopolitical tension—it has redrawn the energy map. 

The ripple effects are being felt unequally: exporters find windfalls amid volatility; importers face inflation, uncertainty, and political pressure.

The next 90 days will determine whether this crisis remains a flashpoint—or evolves into a structural economic realignment.

Sun Jun 15, 2025