US-Iran war ‘pause’ masks deeper shock for more countries worldwide

Dubai: The US’ conflict with Iran has entered what President Donald Trump described as a “pause,” easing immediate fears of escalation but leaving the core geopolitical standoff unresolved.

The halt in hostilities reflects a temporary ceasefire rather than a negotiated settlement. Key flashpoints — including Iran’s nuclear program and the security of the Strait of Hormuz — remain unchanged, keeping the risk of renewed conflict firmly in place.

While the military situation has stabilized for now, new reports from S&P Global Market Intelligence and Fitch Ratings show the economic fallout is intensifying across regions and sectors.

The most immediate shift is how the conflict is now affecting global supply chains.

S&P Global Market Intelligence warns that the disruption has expanded far beyond energy markets, stating that “disruptions are spreading from crude oil and LNG into refined fuels, fertilizers, plastics, metals and even helium”

That shift matters. Shortages are no longer limited to higher oil prices. They are beginning to affect industrial inputs, food production, and manufacturing output.

The report notes that purchasing manager data already shows “manufacturing output across much of Asia-Pacific has weakened sharply, while input prices surged,” signaling that supply constraints are becoming structural rather than temporary.

The pressure is most visible across Asia-Pacific economies, many of which rely heavily on imported energy and refined fuels routed through regional hubs.

S&P describes a widening divide between economies that can absorb the shock and those that cannot, categorizing them into “steady,” “squeezed,” and “stressed” groups based on their ability to manage inflation, currency pressure, and financing risks

The report highlights that the region may be shifting “from price volatility to physical shortages,” a transition that increases risks to growth, currencies, and financial stability.

Fitch Ratings models a more severe trajectory if the conflict drags on. While report assumes disruptions ease in the coming months, under an adverse case — where the Strait of Hormuz remains effectively closed — the consequences broaden significantly.

Fitch says a prolonged conflict would mean “sustained high energy prices, tighter financial conditions and lower global growth”  That combination feeds directly into sovereign risk, corporate credit stress, and market volatility.

The pressure is more immediate for emerging economies. Fitch identifies multiple transmission channels: “higher prices for energy imports, supply-chain disruptions, higher inflation… and more costly and difficult access to international capital markets”

Countries that depend heavily on imported energy — particularly in South Asia and parts of Southeast Asia — are especially exposed. The report also flags second-order effects. Disruptions to fertilizer exports from the Gulf could reduce agricultural output and push food prices higher, amplifying inflation and increasing social pressure in vulnerable economies.

The ceasefire reduces immediate military risk. It does not address the structural drivers of the conflict. Energy flows remain vulnerable. Supply chains are already under strain. Fiscal and monetary responses are becoming more constrained across economies.

The result is a shift in how the conflict is being felt. What began as a regional military confrontation is now feeding into a broader global economic shock — one that continues to build even as the fighting slows.

The key uncertainty is timing. Does this pause lead to de-escalation and negotiations? Or does it mark a temporary break before deeper disruptions take hold?