When the ceasefire was announced on April 7, oil prices fell sharply — WTI crude dropped nearly 8% within hours, and the relief across global markets was palpable. But relief is not recovery. The economic damage from forty days of war and the effective closure of the world’s most critical energy chokepoint has been accumulating in ways that a two-week truce cannot reverse. Prices are still elevated, supply chains are still fractured, and the infrastructure that was destroyed will take years, not weeks, to rebuild. For millions of American households, the bill is arriving regardless of what happens in Islamabad.
The war’s most immediate footprint landed at the gas pump. Economists are penciling in a 1% increase in the consumer price index for March — the sharpest one-month advance since 2022 — after the Iran war pushed gas prices at the pump up by about $1 per gallon. By early April, gasoline was running at $4.16 per gallon nationally — up nearly 40% from pre-war levels of $2.98. Diesel hit $5.67, a 50% increase. Jet fuel, which translates directly into airline ticket prices, nearly doubled. US consumers said they expected an inflation rate of 3.4% over the next 12 months, up 0.4 percentage points from February, with near-term inflation expectations jumping in March by the most in a year as consumers anticipated higher gas and food prices with the onset of war in the Middle East.
The burden of those price spikes is not evenly distributed. In 2024, Americans in the lowest income quintile spent 30.6% of their pre-tax income on transportation, compared with 9.6% for the highest income quintile. Rural households, who drive significantly more, have been hit hardest. Amazon has added a fuel surcharge to its e-commerce deliveries, mortgage rates have risen to their highest mark in seven months, and consumers may soon see higher prices for soda bottles and detergents. The war reached into ordinary American life through dozens of channels that have nothing to do with the Persian Gulf.
The Supply Chain Is Not Bouncing Back
For the first time in modern history, both of the Middle East’s major maritime corridors were simultaneously blocked. The Red Sea route to Europe, already operating at 49% of pre-crisis capacity, was blocked again. The Strait of Hormuz — carrying 20% of the world’s daily oil supply and 20% of global LNG — was effectively closed. Maersk, MSC, CMA CGM, and Hapag-Lloyd all suspended transits. Tankers that could not transit Hormuz were either waiting or going around Africa via the Cape of Good Hope, adding 10 to 14 days to each voyage. Vessels that previously sailed Hormuz-Red Sea-Suez-Mediterranean are now rerouting around the Cape. That detour compounds across hundreds of voyages annually — fewer trips per ship, tighter global capacity, higher freight rates.
Hapag-Lloyd struck a cautious tone on Wednesday over a possible resumption of shipping through the Strait of Hormuz following the ceasefire, warning that a full return to normal operations could take up to two months, with industry executives cautioning that even with a truce in place, restoring confidence and ensuring safe passage will be key to any sustained recovery. Maersk stated that “the ceasefire may create transit opportunities, but it does not yet provide full maritime certainty.” The war risk insurance market — which effectively collapsed in the first days of March when major underwriters withdrew coverage — has not recovered. During the Red Sea crisis, insurance premiums surged but coverage stayed available; shippers paid more, absorbed the cost and kept moving. Hormuz is different. It is more than just the market getting more expensive — it stopped working.
The agriculture sector faces its own timeline of damage. Fertilizer represents one of the biggest downstream risks: roughly one-third of global fertilizer trade transits the Strait of Hormuz, including large volumes of nitrogen exports. New Orleans fertilizer hub urea prices have already risen from $475 per metric ton to $680 per metric ton — and the timing is poor for the planting window in the Midwest for soy and corn. American farmers entered the war already carrying elevated debt loads and tight margins. The added fuel and fertilizer costs — arriving simultaneously during spring planting — have pushed many operations to the financial edge.
The New Normal for Energy Prices
The 2026 Iran war, including the closure of the Strait of Hormuz, has led to what the International Energy Agency characterized as the “largest supply disruption in the history of the global oil market,” echoing the 1970s energy crisis through acute supply shortages, currency volatility, inflation and heightened risks of stagflation and recession. Higher consumer prices have increased the risk of “stagflation” — when stagnant economic growth occurs alongside high unemployment and high inflation — which is how the US economy responded to the oil price shocks of the 1970s, with experts noting the combination of high inflation plus high unemployment is “just really tough for the Fed to deal with,” since “they can either juice the economy or slow it down, and the two problems call for opposite solutions.”
Even assuming the ceasefire holds and shipping normalizes over the next two months, the structural damage is permanent in key areas. QatarEnergy declared force majeure on all LNG shipments on March 4, 2026, after Iranian attacks on its Ras Laffan facilities. At least 10% of global oil supply remains offline due to strikes that hit refineries, storage facilities, and oil fields across the region. The IEA has said it could take six months or longer for sites around the Persian Gulf to become fully operational again. Qatar lost 17% of its LNG production capacity, and Ras Laffan — its main production site — could take three to five years to rebuild.
As oil prices fall back, inflation in Europe and Asia in 2026 would likely be only around 0.5 percentage points higher than pre-conflict forecasts, with central bank strategies remaining largely unchanged and the impact on real GDP growth minimal — but only if prices do fall back. A more severe scenario in which the conflict persists for several months could see oil prices rise to around $130 per barrel before declining in the second half of the year, with the euro-zone economy probably contracting in Q2 and then flatlining, while the US economy would fare better but nonetheless experience a slowdown in growth.
The ceasefire announcement saved the world from a worse scenario. But it did not undo the damage already inflicted. Even if the waterway reopens, the disruption to global supply chains will be felt long after ships have been cleared to pass en masse, with Hapag-Lloyd’s senior communications director stating: “When the war is officially over, and the bombardments are stopped, that does not mean that the war is over for logistics, because then the real work starts.” The Federal Reserve is watching inflation data closely while holding rates steady — a position that satisfies neither the businesses that need cheaper credit nor the households still paying $4-plus at the pump. The guns may have paused. The bill has not.
Original analysis inspired by Emily Gee, Kyle Ross, Akshay Thyagarajan and colleagues from Center for American Progress. Additional research and verification conducted through multiple sources.
