Page 7 - Policy Economic Report - March 2026

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

Economy in Focus

1. A snapshot of the global economy

Global economic growth amidst war crisis
The escalating conflict involving the United States, Israel, and Iran has created one of the most
significant geopolitical shocks to the global economy in recent years. While the military implications are
substantial, the economic impact is already becoming visible. The war is disrupting global trade routes,
pushing oil prices higher, and significantly increasing shipping and insurance costs, ultimately influencing
global trade data and market stability.

The cascading economic fallout from the conflict in the Middle East is radiating well beyond the Gulf,
reshaping markets, and supply chains – potentially for years to come. A prolonged war that keeps
energy prices high could drive up inflation and, interest rates. Further, threats to cargo ships could snag
supply chains, further raising prices for businesses and consumers.

The severity of the economic consequences depends on how long it lasts. Before the war began, the IMF
expected the global economy to grow by 3.3% this year. The fund has not yet changed its outlook, but it
has been closely monitoring developments and listed several risks to the global economy, including
more trade disruptions, surges in energy prices and volatility in financial markets.

Goldman Sachs Research forecasts global real GDP to increase by 2.9% in 2026. In case of US, the real
GDP will expand 2.8% in 2026. The key driver is that the drag from tariff increases should give way to a
boost from business and personal tax cuts. Further, real wage gains and rising wealth may also help
sustain consumer spending growth, even as new tax incentives, easier financial conditions, and reduced
policy uncertainty would boost business investment.

Global trade: A supply shock
As of March 2026, the ongoing war in the Middle East—specifically involving Iran, Israel, and the U.S.—is
severely disrupting global trade by choking key maritime route like the Strait of Hormuz. Around a
quarter of global seaborne oil passes through the Strait of Hormuz, along with roughly one-fifth of
liquefied natural gas (LNG) shipments. The disruption of this single maritime route has immediate global
consequences because several major oil-exporting countries—including Saudi Arabia, Kuwait, Iraq, and
the United Arab Emirates—rely heavily on the Strait of Hormuz for most of their seaborne energy
exports. Any disruption to transit through this narrow chokepoint has immediate consequences for
global energy markets such as higher freight charges, soaring shipping insurance costs, and significant
delays, while inflating oil and gas prices.

The war has already taken roughly one-third of the world’s helium supply off the market, following a
disruption at the massive Ras Laffan energy hub. Helium is essential for semiconductor manufacturing,
medical imaging, and other high-tech uses. A prolonged disruption would tighten an already
concentrated market and could become a serious constraint for industrial supply chains.

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