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MARKETSCAPE | 04.22.26

Diverging Paths: Assessing the Iran War’s Uneven Economic Impact

As the war in Iran reshapes global economic outlooks, we examine what’s driving diverging impacts across regions—and why some are better positioned than others.

As we began this year, expectations were that economic growth were going to accelerate globally relative to what we saw in 2025.

And of course, there are a lot of positive tailwinds driving that even here in the United States.

However, the war in Iran has obviously complicated the matter in a number of different ways.

All else equal, when you have this conflict and ultimately leading to a supply shock in energy and energy prices going up, it has a negative impact on economic growth and it actually starts to pick up inflationary pressure.

All else equal, when we think about gross domestic product growth as a result of this war, before the war and where we are today, we're expecting to see economic growth come down slightly and inflationary pressures go up.

In fact, the International Monetary Fund (IMF) recently announced or re released their estimates for economic growth and inflation and the numbers were pretty much as you would expect them to come in slightly lower economic growth, slightly higher levels of inflation.

What's interesting though is as you double click and take a look at what's happening around the world, this war and the conflict and energy prices going up disproportionately effects different economies around the world.

Ultimately, it comes down to whether or not these countries are energy importers or energy exporters into the world.

And taking it one step further, it's not just energy overall, but it's the type of energy.

Think about oil, for example.

If you're looking at West Texas Intermediate (WTI, extracted in the U.S.) and Brent (extracted near Europe) crude oil, you'll notice that they tend to move in tandem because oil is a globally priced commodity.

When you take a look at natural gas, for instance, you'll notice that it is a regionally priced commodity and you'll see prices in Asia, prices in Europe, and prices in the U.S at very different places.

Ultimately, while this war has a negative impact on economic growth and does create some inflationary pressure, from a relative standpoint, the U.S. is far more isolated relative to Europe, for example, or Asia, which largely depend on energy imports in order to keep their economy going.

But even here in the U.S., it's a bit of a double edged sword.

Had this happened maybe a few years ago when the U.S. was importing energy from around the world, no doubt this would have been a negative.

The United States today is actually a net energy exporter.

However, while it might have a positive impact and create a tailwind for certain sectors of the economy —energy, for example — we have to recognize that higher oil prices is a tax on consumption.

At the end of the day, when oil prices go up, gas prices go up and consumers have less money in their pocket to spend on other things after filling up their car with gasoline.

What we're noticing here is as a result of the spike in energy prices, this K-shaped economy which we've talked about here in the U.S. is further exacerbated.

You're noticing certain segments or certain cohorts of the U.S. population.

Some they're doing relatively well, and others at the lower end of that K from an income distribution standpoint suffering as affordability continues to be problematic.

 

Meet Your Expert

Joseph Tanious

Chief Investment Strategist, North America

 

Joseph Tanious is responsible for developing and communicating the firm’s investment outlook across asset classes as well as producing investment analysis and thought leadership for the broader marketplace globally. 

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IMPORTANT INFORMATION

Northern Trust Asset Management is composed of Northern Trust Investments, Inc., Northern Trust Global Investments Limited, Northern Trust Fund Managers (Ireland) Limited, Northern Trust Global Investments Japan, K.K., NT Global Advisors, Inc., 50 South Capital Advisors, LLC, Northern Trust Asset Management Australia Pty Ltd, and investment personnel of The Northern Trust Company of Hong Kong Limited and The Northern Trust Company.

Issued in the United Kingdom by Northern Trust Global Investments Limited, issued in the European Economic Association (“EEA”) by Northern Trust Fund Managers (Ireland) Limited, issued in Australia by Northern Trust Asset Management (Australia) Limited (ACN 648 476 019) which holds an Australian Financial Services Licence (License Number: 529895) and is regulated by the Australian Securities and Investments Commission (ASIC), and issued in Hong Kong by The Northern Trust Company of Hong Kong Limited which is regulated by the Hong Kong Securities and Futures Commission. 

For Canada, Asia-Pacific (APAC) and Europe, Middle East and Africa (EMEA) markets, this information is directed to institutional, professional and wholesale clients or investors only and should not be relied upon by retail clients or investors. This information may not be edited, altered, revised, paraphrased, or otherwise modified without the prior written permission of NTAM. The information is not intended for distribution or use by any person in any jurisdiction where such distribution would be contrary to local law or regulation. NTAM may have positions in and may effect transactions in the markets, contracts and related investments different than described in this information. This information is obtained from sources believed to be reliable, its accuracy and completeness are not guaranteed, and is subject to change. Information does not constitute a recommendation of any investment strategy, is not intended as investment advice and does not take into account all the circumstances of each investor.

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