How the Iran war is reshaping the global economy

The economic impact of the Iran war is already showing up in rising prices. Energy costs have surged, with oil and gas prices driving a sharp increase in inflation and pushing up the cost of everyday goods. But Harvard economist and former IMF Deputy Managing Director Gita Gopinath says the bigger risk is what she calls “structural damage”—long-term economic shifts that don’t show up immediately but build over time.

So far, the hit to global growth is modest, but it could worsen quickly if energy prices remain elevated. And while the US is somewhat insulated, the inflation shock is being felt worldwide. At the same time, artificial intelligence investment has helped offset some of the economic drag from tariffs in the US, masking underlying weaknesses. But whether that translates into lasting productivity gains remains uncertain.

The price increases are immediate—but the deeper economic damage may take longer to unfold.