Trump touts peace in West Asia: How much did Iran war cost the world?

As US President Donald Trump projects himself as a peacemaker in West Asia, the economic cost of the Iran war shows why diplomacy carries a trillion-dollar value for the world.

According to the Institute for Economics and Peace (IEP)’s Global Peace Index 2026, the global economy could be missing out on nearly $2.2 trillion due to the difference between a prolonged fragile ceasefire and a renewed escalation of the conflict. The report describes this amount as the economic value of successful diplomacy.

The conflict, which triggered major disruption across the Middle East, has hit global energy markets, shipping routes, food supply chains and financial stability. The biggest pressure point has been the Strait of Hormuz, one of the world’s most important energy corridors, carrying nearly one-fifth of global petroleum consumption and a significant share of liquefied natural gas (LNG) trade.

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The IEP estimates that under a scenario involving an extended ceasefire and partial reopening of the Strait of Hormuz, global GDP losses could stand at around $1.3 trillion. However, if fighting resumes and energy disruptions worsen, losses could surge to about $3.5 trillion, creating the $2.2 trillion gap linked to diplomacy.

Unlike previous energy shocks where oil-producing nations benefited from higher prices, the Iran conflict created what analysts call a “Hormuz paradox." Several energy exporters faced higher prices but struggled to ship supplies, leaving them hit by both lost revenue and rising costs.

Iran has faced the steepest economic impact, with estimates suggesting its economy could shrink sharply due to damaged infrastructure, lost oil exports and sanctions-related pressure. Gulf economies have also been affected as shipping risks, insurance costs and supply chain uncertainty increased.

The impact has travelled far beyond the Middle East. Higher energy prices have raised concerns over inflation, fertiliser shortages and food security. Gulf countries are major suppliers of key fertiliser inputs, and disruptions could affect agricultural costs across Asia and developing economies.

The World Bank has also warned that the conflict could drag global growth to its weakest pace since the Covid-19 pandemic, citing elevated energy prices, inflationary pressures and tighter financial conditions.

Asia remains among the most vulnerable regions because of its dependence on Middle Eastern oil and gas supplies. Countries including India, China, Japan and South Korea rely heavily on energy shipments passing through the Strait of Hormuz.

While Trump has highlighted efforts to restore peace in West Asia, economists warn that the full financial impact of the war may continue unfolding over the coming years through trade disruption, higher borrowing costs and pressure on vulnerable economies.

The IEP report says the Iran conflict underlines a larger reality — wars are no longer limited to battlefields. Their costs travel through oil prices, food bills, shipping lanes and household budgets across the world.