Global markets shrug off Iran conflict as AI boom offsets oil shock
Six months after the US-Israel attack on Iran, the global economy has avoided the predicted recession, with major stock indexes posting strong gains since late March. Oil prices remain about 20% above prewar levels, raising costs for fuel and travel, but enthusiasm for artificial intelligence has helped offset the war's drag. Investors who stayed calm have benefited, while those on the move face higher prices.
The conflict's economic toll has been uneven, with the Strait of Hormuz disruption pushing Brent crude from roughly $72 to nearly $120 per barrel before settling about 20% above prewar levels. The IMF's July assessment framed the global economy as caught between war-driven strain and artificial intelligence investment enthusiasm, a tension reflected in divergent outcomes across sectors.
Aviation has absorbed the sharpest shock, with jet fuel costs projected 70% higher than 2025 levels, prompting Lufthansa to cut 20,000 short-haul flights and contributing to Spirit Airlines' collapse. Meanwhile, the crisis accelerated energy transitions: electric vehicle sales surged dramatically in Singapore, New Zealand, and Colombia, while Southeast Asian nations expanded renewable deployment and African countries accelerated solar installation and domestic refining capacity.
The war's economic effects could widen existing disparities, with investors who held steady reaping substantial gains while travelers and fuel-dependent households absorb persistent cost increases. Higher airfares and fuel surcharges may persist, limiting mobility for lower-income groups and reducing competition among airlines. The clean-energy acceleration could reshape transportation markets over time, though declining EV demand in the US and China suggests adoption remains uneven. Consumers may face prolonged trade-offs between energy costs and technological transition, with the full societal impact depending on how long oil prices remain elevated.