Nearly one month into the U.S.-Iran war, what began with promises of a swift American victory and unconditional Iranian surrender has evolved into an open-ended conflict with no resolution in sight — and an economic shockwave that is spreading far beyond the Middle East.
For the global economy, this war is triggering a price crisis. For financial markets, it is forcing a reassessment of U.S. Federal Reserve interest rate policy. And for Taiwan, the warning signs are visible in something as mundane as a run on plastic bags.
The Strait That Choked the World
The most immediate transmission mechanism is energy. Iran's response to U.S. strikes has gone beyond counterattacking American military bases in the region. Tehran has also targeted energy production infrastructure across the Middle East and, critically, has blockaded the Strait of Hormuz — allowing passage only to vessels from countries it considers friendly.
The downstream consequences are now cascading through the global economy. Refining, petrochemicals, aviation, and electricity generation are all under pressure.
According to data cited by Germany's Handelsblatt, prices for many chemical industry inputs — including fertilizers, plastics, rare gases, and certain metals — have risen between 10% and 50% compared to one month ago. Agricultural input costs in India and Brazil have already increased by around 30 percent due to fertilizer price spikes.
These are still early-stage effects. The more consequential price transmission channels have yet to fully materialize.
Asia in the Crosshairs
Asia is bearing the brunt of this crisis more than any other region outside the Middle East itself. Most Asian economies depend on the Strait of Hormuz for 60 to 70 percent of their energy imports; even India, the least dependent among major Asian importers, still relies on the strait for roughly 40 percent. Governments across the region have already begun rolling out emergency response measures.
What makes this particularly significant for the global economy is Asia's central role in manufacturing and supply chains. When industrial production costs rise sharply across Asian economies, those increases inevitably pass through to export prices worldwide.
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Consider one example: approximately 40 percent of the world's helium supply comes from the Persian Gulf, and semiconductor fabrication requires helium. A prolonged disruption could affect chip production — with consequences that ripple across every industry that depends on semiconductors.
By contrast, while African nations are also suffering serious economic harm, their relatively smaller role in global manufacturing means their cost increases have a more limited effect on world prices.
No Quick Recovery Even After a Ceasefire
If the conflict cannot be resolved in the near term, the economic damage will deepen and lengthen. Even a ceasefire would not bring immediate relief — production infrastructure destroyed during the war cannot be rebuilt overnight.
Supply-demand imbalances will persist for a considerable period regardless of when the fighting stops. This is why economists and market analysts are now warning seriously of a global price crisis.
For financial markets, the most pressing question is what this means for U.S. Federal Reserve policy. Before the war, the consensus — both inside the Fed and among market participants — was that interest rate cuts would continue through this year, with debate focused only on the pace and number of cuts.
Any such reversal would carry further consequences: for the U.S. dollar, for exchange rates across Asia, for commodity prices, and for gold.
Taiwan's Plastic Bag Panic Is Just the Beginning
Taiwan is not insulated from any of this. The "plastic bag chaos" that has been making headlines across the island over the past several days is best understood as a prelude to a larger crisis.
It is not entirely irrational. Plastic bags are petrochemical products, and the petrochemical industry is built on crude oil. When raw material supply at the top of the chain is disrupted, shortages and price increases at the downstream consumer level are a logical consequence.
For now, the rush to stockpile bags is being driven largely by psychology and wholesale-level hoarding rather than actual physical shortages. But if the war continues without resolution, price increases become increasingly difficult to avoid.
A Government Falling Short
Against this backdrop, Taiwan's government response has been conspicuously inadequate. South Korea, for instance, has already introduced a package of measures including restrictions on government vehicle use.
The administration of Lai Ching-te (賴清德), by contrast, has so far done little beyond extending its policy of freezing energy prices — a costly intervention that perversely benefits higher-income, higher-consumption households at the expense of lower-income ones. That alone is not a serious response to the scale of what is coming.
If the lasting public memory of how the Lai administration handled this global price crisis turns out to be Premier Cho Jung-tai (卓榮泰) asking the public to "say thank you to CPC Corporation (中油)" — that would be a profound failure of governance, and a deeply embarrassing one.
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