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Global economy faces protracted war inflation despite fragile Iran-US ceasefire

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While the military dimension of the conflict in Iran appears to have reached a temporary standstill, its impact on global prices remains pervasive. Economists project that the disruptions to the global oil supply, which have persisted for over a month, will continue to trigger volatility across the broader economy.

According to data cited by NerdWallet, fuel prices have surged by more than 40% since February and are not expected to decline in the near term. Airfares have also recorded significant increases during this period. New price hikes across diverse sectors, including food, apparel, and electronics, are deemed likely in the coming months, adding further pressure to already persistent inflationary trends.

The escalation began on February 28, following the launch of strikes by the US and Israel. Iran responded by closing the Strait of Hormuz, a critical transit point for global oil supplies and other essential commodities. Prior to the attacks, Brent crude, the global oil benchmark, was trading at approximately $80 per barrel; it subsequently surged past the $100 mark as the conflict intensified.

The White House has maintained an inconsistent stance regarding its objectives and the anticipated duration of the war, though it has exchanged rhetoric with Tehran regarding a potential conclusion to the hostilities. Tensions reached a critical peak when US President Donald Trump established a Tuesday deadline for a ceasefire agreement, threatening to strike Iranian infrastructure and destroy an entire “civilization” should no deal be reached.

Less than two hours before the expiration of Trump’s deadline on Tuesday night, a two-week ceasefire was secured to allow for continued negotiations toward a long-term agreement. During this pause, Iran agreed to reopen the Strait of Hormuz. However, the ceasefire has had an unstable start. On Wednesday, Iran accused the US of violating the terms of the agreement, citing continued Israeli strikes in Lebanon.

Following the announcement of the ceasefire on Tuesday night, oil prices retreated sharply to approximately $95 per barrel, while US equity markets rallied.

Despite this localized relief, analysts warn that the de-escalation may be temporary and that the economic consequences of the conflict are already deeply embedded. The impact of elevated oil prices is diffusing through the global economy, as international shipping, manufacturing, and food production remain heavily dependent on petrochemicals and natural gas. Consequently, rising energy costs are expected to drive up the price of food, commercial goods, and daily necessities, further straining household budgets already diminished by years of inflation.

The economic fallout of the war is compounded by the ripple effects of tariffs that were in place prior to the start of hostilities. On March 2, shortly after the initial strikes, the Yale Budget Lab published an updated assessment regarding the impact of tariffs on consumer prices. The report found that the costs of imported consumer goods passed on to buyers ranged from approximately 40% to 76% for “essential goods” such as electronics and clothing, and between 47% and 106% for “durable goods” like motor vehicles and household appliances.

The current inflation rate in the US stands at 2.4% according to the Consumer Price Index (CPI), with the next update covering March scheduled for release on April 10. Inflation has remained between 2.3% and 3% over the past year, down significantly from the 40-year high of 9% recorded in June 2022.

Analysts at Wells Fargo, in a report dated March 23, cautioned against drawing extreme conclusions from early data. The note recalled that tariffs proposed by the president last April were viewed by some as a guaranteed trigger for an economic recession that ultimately did not materialize. While analysts noted that the surge in crude oil prices will likely drive global consumer price inflation, they suggested that political and economic constraints would probably shorten the duration of the war. The note added that while the risk of extensive structural damage to Persian Gulf energy infrastructure remains, it is believed both sides would prefer not to destroy the resources that provide nearly all of the region’s revenue.

Concurrently, the Organisation for Economic Co-operation and Development (OECD) stated that the war in Iran will test the resilience of the global economy. An OECD report released March 26 forecasts that inflation in the US will average 4.2% in 2026, reflecting higher energy prices due to oil market disruptions. The report warned that a protracted conflict in the Middle East could trigger an even more severe price shock.

Recession risks grow

According to investment banking firm Macquarie Group, if the ceasefire fails to hold and the war continues into June, there is a 40% probability that oil could reach $200 per barrel. An increase of this magnitude could push consumer prices even higher, rattle markets, and drive an already fragile economy toward a recessionary cliff.

Daniil Manaenkov, an economist and US forecasting expert at the University of Michigan, stated that if oil prices remain between $150 and $200 per barrel for one or two months, a recession becomes highly probable.

Evidence suggests this breaking point could arrive sooner than anticipated. Consumers tend to alter spending habits when concerned about high prices or job security. Manaenkov noted that consumers are already dining out less, opting for cheaper store-brand products, and reducing travel. This decline in spending could slow growth and pull the economy closer to a recession.

The International Monetary Fund (IMF) echoed these concerns in a March 30 blog post, warning that a prolonged conflict could drive up prices and slow economic growth worldwide. IMF analysts noted that the duration of the war, its potential expansion across the Middle East, and the resulting damage to infrastructure and supply chains will determine the extent of economic devastation in the coming days, weeks, and months.

Key products and services facing price increases

Manaenkov noted that it can take six to 12 months for rising energy prices to fully filter through to all other consumer costs. While gasoline prices are high, the primary driver of overall cost increases is diesel fuel. Because the majority of freight transport relies on diesel, when those prices rise and remain elevated, almost every other sector follows.

Manaenkov described the process: “The timeline typically starts with an energy response, followed by an impact on shipping costs, then consumer products, and finally the services sector. While the impact on services is weaker than that seen in energy prices, it can still be quite significant.”

The areas likely to see price increases as a result of the war in Iran include:

All goods requiring diesel transport: Diesel fuel powers trucks, freight vehicles, construction equipment, agricultural machinery, and maritime vessels. As the cost of operating these vehicles rises, additional costs are added to all production materials and finished goods. According to AAA data, diesel prices have increased by approximately 50% since the start of the war, reaching $5.67 per gallon on Wednesday.

Air travel: Airlines operate on jet fuel, and costs have already risen sharply. In response, carriers have begun increasing ticket prices. Some companies are reportedly planning to cancel flights to save on fuel costs, which will increase competition for remaining seats and drive travel prices higher.

Food: Food production is facing multiple simultaneous pressure points from high prices. Beyond the diesel required for farm machinery and delivery trucks, fertilizers represent a major challenge. Nitrogen-based fertilizers require liquefied natural gas, while phosphate fertilizers—made from urea, ammonia, and sulfur—are critical for the production of staples such as wheat, corn, rice, and fruit. Approximately one-third of seaborne fertilizer passes through the Strait of Hormuz. If farmers cannot access affordable fertilizer now, they may be unable to plant sufficient crops during the spring season, eventually resulting in higher prices.

Plastics and packaging: Plastic production requires oil and natural gas. With approximately 85% of Middle Eastern polyethylene exports passing through the Strait of Hormuz, the price of raw materials for plastics is expected to rise. This affects water bottles, credit cards, furniture, household goods, food containers, automotive parts, and anything sealed or wrapped in plastic.

Synthetic clothing: Most modern apparel is produced from petrochemicals, including polyester, nylon, spandex, and fleece. The garment industry, particularly fast-fashion manufacturers, depends on synthetic fibers sourced through supply chains passing through the Strait of Hormuz. As raw material costs rise, fabric costs will follow, impacting garment prices.

Technology and electronics: This industry is facing dual disruptions. The Strait of Hormuz is a critical shipping route for graphite raw materials essential for lithium-ion battery production, while helium gas is required for semiconductors, fiber optics, and medical devices. Supply disruptions could increase the price of smartphones, laptops, electric vehicles, energy storage systems, and diagnostic medical equipment such as MRI machines.

All aluminum products: Gulf nations provide approximately 9% of the global aluminum supply. These countries also account for 21% of US unrefined aluminum imports and 13% of processed aluminum imports. Aluminum is a fundamental material for construction, vehicles, aircraft, power transmission, and appliances; export delays could raise the prices of construction products, industrial equipment, planes, and automobiles.

Automobiles: Increases in plastic and aluminum prices, combined with other supply chain disruptions, are likely to drive up vehicle costs. Manaenkov noted that production disruptions in South Korea or Japan could cause issues for US manufacturing, contributing to vehicle shortages and increasing prices for both new and used cars.

Vulnerability in oil flows

Even if the war concludes, shipping flows through the Strait of Hormuz may not return to normal immediately, and fuel prices in the US may not necessarily drop. Warnings persist that Iran could continue to exercise control over oil flows, keeping global and domestic fuel costs high. In other words, even if the US ends its intervention entirely, Iran retains the leverage to maintain economic pressure.

Manaenkov compared the situation to a plumbing system: “This is not like a faucet you just turn on and off. Once you stop pumping, you must expend significant resources to restart the flow.”

While the conflict is currently paused and traffic in the strait is slowly resuming, observers note that the war is far from over and unrest remains widespread across the Middle East.

On Wednesday, just hours after the temporary ceasefire with the US was established, an Iranian drone reportedly struck a pumping station on Saudi Arabia’s critical East-West pipeline. This pipeline, used to bypass the Strait of Hormuz, carries approximately 7 million barrels of crude oil per day from the Gulf to the Red Sea. The damage caused by the strike could further deepen the energy crisis.

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Anthropic uncovers Claude use by Iranian, Houthi, and Russian units

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11/09/2026

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Artificial intelligence company Anthropic has disclosed attempted “abuses” of its Claude AI model ranging from conventional weapons to biological research by state-linked entities, foreign intelligence services, and cybercrime networks, publishing the findings in a detailed threat intelligence report.

A significant portion of the report comprised the development of guided missile software by the Houthis in northern Yemen and the conversion of the model into a military reconnaissance tool by Iran-linked actors seeking to target US naval assets in the Middle East.

Covering the period between December 2025 and August 2026, the report shared details of activities detected across seven primary areas: cyberattacks, influence operations, mass surveillance, conventional weapons development, biological risks, and unauthorised model distillation.

The company announced that it had terminated all accounts violating its rules and shared the resulting data with relevant international counterparts.

According to findings by Anthropic’s Threat Intelligence unit, a weapons cell based in northern Yemen, where the Houthis operate, substituted human software engineers with the Claude Code system across three distinct missile development programmes.

These efforts comprised a tactical rocket equipped with a terminal guidance system powered by a commercial smartphone processor, a multi-stage ballistic missile with a target range exceeding 2,000 kilometres, and missile designs carrying a hypersonic glide vehicle.

The cell utilised the artificial intelligence to adapt open-source autopilot software to the smartphone processor, optimize flight control algorithms, and compile firmware.

Structuring their Claude accounts like a virtual engineering team, the Houthis assigned one account to write code, another to conduct research, and a third to review and audit the written code.

The report noted that the group conducted an actual test launch with a guided rocket in the Yemeni theatre.

Immediately following the failure of the live-fire test, the actors were documented returning to the Claude platform within hours to upload telemetry data and diagnose the cause of the malfunction.

The cell was observed successfully compiling offline simulation tools capable of operating independently even if access to Claude were severed.

Iran tracked US warships and personnel

Another military case detailed in the report involved attempts by Iran-linked cyber actors to target US naval forces in the Middle East.

These actors were found to have scraped open-source military data to draft operational targeting manuals directed against American warships and personnel.

Iran extracted name rosters of American military personnel from the captions of publicly accessible military photographs, monitored vessel and aircraft transponder data, authored code to scan commercial satellite imagery, and mapped vulnerabilities in maritime satellite communication terminals.

Other networks linked to the Tehran government were determined to have developed domestic and regional surveillance systems. A Qom-based unit produced a malicious web browser extension disguised as a prayer-time application to harvest credentials from social network users, funneling the data into a central case management system designated “Arman”.

Additionally, official Iranian institutions reportedly cloned authors’ voices using AI and operated multilingual disinformation networks to lay the groundwork for the supreme leadership succession.

Russia also used it for an autonomous kamikaze drone swarm

The report stated that an independent Russia-based software team developed fully autonomous kamikaze uncrewed aerial vehicle swarm software dubbed “DronDoc” or “Serafim”.

Affiliated with a university connected to the Russian Academy of Sciences, the team was said to have trained the artificial intelligence to distinguish between friendly and hostile elements using footage retrieved from the Ukrainian battlefield.

The developed system was designed with the capability to select targets, execute live human classification, and issue detonation commands without requiring human intervention, with simulations run directly against coordinates in the Donetsk region.

Meanwhile, the Russian-origin “Midnight Blizzard” group targeted the Ukrainian drone supply chain and staged attacks aimed at foreign officials and drone engineers by compromising hotel Wi-Fi networks.

A procurement manager stationed at a design bureau in Moscow was also discovered drafting plans via Claude to circumvent European sanctions. The individual was recorded assembling fraudulent tender and logistics correspondence to transport German-made magnetometers, space-grade photovoltaic sheets, and military aviation oxygen systems into Russia through intermediary firms based in China and Hong Kong.

Biological threats and pathogen engineering

The report disclosed five concrete cases regarding the deployment of artificial intelligence in hazardous biological research. Virologists attached to a military research institute were documented using AI for gain-of-function research aimed at enhancing the transmissibility and immune-evasion capabilities of the mosquito-borne Chikungunya virus.

Similarly, experimental designs were prepared to adapt the H5 avian influenza variant, which carries a 50% mortality rate in humans, to mammals and confer airborne transmission capabilities, while immune-evasion mechanisms of pathogens from the smallpox virus family were modelled.

The identities of paralytic neurotoxins subject to export control lists and haemorrhagic fever virus proteins featured on the World Health Organization’s priority epidemic list were deliberately masked and submitted to the AI for analysis.

In addition, a consultant working on behalf of the Malian State Intelligence Service designed a mass surveillance platform designated “Lakana 360” with the assistance of Claude.

The system was designed to monitor approximately 25 million SIM cards registered across three mobile operators in the country without requiring court orders, intercept audio recordings, and cross-reference records with biometric databases.

Separately, leading Chinese artificial intelligence firms including Alibaba, Moonshot, DeepSeek, Zhipu, and Xiaomi were alleged to have initiated hundreds of millions of unauthorised sessions to extract the logical reasoning chains of Claude models. Moonshot and DeepSeek platforms reportedly routed their own users’ queries secretly through Claude, in the process exposing Chinese police surveillance feeds from hundreds of cameras covering military facilities in Chengdu, internal credentials of Chinese state-owned enterprises, and live database access codes connected to the Russian Defence Ministry to third parties.

Türkiye detail in the report

The report also detailed cases involving the abuse of the Claude AI model, incorporating findings concerning an Istanbul-based technology firm.

In case GTG-84005 of the intelligence report, an operation aimed at commercial election manipulation targeting voters in Malaysia was intercepted.

According to the findings, the operation operated under the guise of a startup providing cyber intelligence and counter-disinformation tools. Anthropic determined that Istanbul-based BBS Bilisim Teknolojileri was behind the infrastructure.

According to documents, the company marketed the architecture as a paid influence operation service styled as a “military-grade, AI-powered, real-time political operations ecosystem”.

Managing roughly 1,000 synthetic X accounts, the system processed demographic and electoral data across 222 parliamentary constituencies in Malaysia, calibrating targeting around sensitive social fault lines including ethnicity, religion, and the monarchy.

The network also circulated content from Russian and Chinese state media masquerading as independent Malaysian news via an artificial media outlet designated “Malaysia Pulse”, while manufacturing fraudulent intelligence dossiers targeting an opposition politician and civil society organisations.

Anthropic reported that the network received a request to generate 1 million artificial impressions in support of the Malaysian Prime Minister and sought to secure a contract with the country’s national communications regulatory authority.

While no evidence emerged that the undertaking succeeded, the associated user accounts were closed and operational digital indicators were shared.

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EU pursues closer ties with Israel on space and air defence

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09/09/2026

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The EU is turning to Israel to bolster its new initiatives in high-tech air defence and space capabilities.

Shimrit Maman, head of the Israel Space Agency, travelled to Brussels this week and met on Tuesday with European Commissioner for Startups, Research and Innovation Ekaterina Zaharieva to discuss key sectors, including artificial intelligence and robotics.

The visit took place ahead of European Commission President Ursula von der Leyen’s first major speech on space, scheduled for Thursday at a summit in Paris.

In the speech, Von der Leyen is expected to warn against mounting hostilities and emphasise the necessity of strengthening Europe’s presence in space.

“It’s very hard to do everything by yourself,” Maman told Politico, adding that the militarization of space is “already happening, it’s just we are not aware of the extent,” and noting that allies are showing growing interest in “dual-use” technologies intended for both civilian and defence purposes:

“One thing we’re working on is early-warning systems. For example, during the last wave [of missile attacks] with Iran, we saw this very clearly. How we were getting the alerts to all the civilians in Israel, and that made the casualties so low. This is part of the system. We’re working on a very holistic view, where you can alert in advance, the system alerts the citizens.”

Following several years of effective disengagement caused by political tensions surrounding the invasion of Gaza, the EU has recently begun forging closer military and technological ties with Israel through a series of agreements.

Competition from Washington and strategic rivalry with Moscow and Beijing have nevertheless underlined the requirement for allies possessing sophisticated industrial capacity.

In 2024, European Commission President Ursula von der Leyen backed calls by Polish Prime Minister Donald Tusk and Greek Prime Minister Kyriakos Mitsotakis to create an EU-funded air defence shield.

Three senior officials involved in the discussions said, however, that the plans stalled after officials in the Commission and several national capitals concluded that the project would require reliance on Israeli air defence technology, which was considered too sensitive one year into the Gaza conflict.

Yet Israel’s Rafael, which is expanding its European operations significantly, has now confirmed that it will open a factory to manufacture the Iron Dome air defence system at a former Volkswagen plant in Germany.

One week ago, Greece signed a 3 billion euro agreement with the Israel Ministry of Defense.

The deal provides for the establishment of a new multi-layered air defence network designed to shoot down drones, hostile jets, and rockets.

“We see everything integrating into this multi-layer defence approach,” Maman said, highlighting satellite imagery and artificial intelligence modelling as primary focal points for joint development efforts:

“I’m not only seeing defence as ballistic missiles from Iran… think about a fire, a flash flood or even a long drought… we have a proven track record, and we’re getting really good results.”

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UK reassures US that new Israeli settlement sanctions are symbolic

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08/09/2026

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The UK has reportedly engaged in behind-the-scenes talks to avoid a backlash from the US over anti-Israel sanctions scheduled for announcement today.

According to a report by Bloomberg, Andy Burnham’s government is expected to ban trade with Israeli settlements in the West Bank today.

Burnham is seeking to pursue a firmer stance on an issue of high importance to the governing Labour Party, though one that risks angering US President Donald Trump.

Foreign Secretary Ed Miliband will unveil a new sanctions regime targeting Israel but limited to Jewish settlements in the West Bank, according to sources familiar with the matter.

Burnham and Trump spoke by telephone on Monday, the Prime Minister’s Office said. A statement noted that the two leaders discussed a two-state solution for Israel and the Palestinian territories.

The discussion suggests that Burnham used the call to notify Trump that sanctions against Israel were imminent.

The proposals under review included a new sanctions regime with measures to block the exchange of goods and services with Israeli settlements.

Miliband also evaluated expanding existing human rights sanctions to encompass the blocking of aid, which has drawn criticism for exacerbating the humanitarian crisis in Gaza.

The Foreign Secretary further considered explicitly endorsing the International Court of Justice’s non-binding 2024 opinion that declared Israel’s occupation of territory currently recognised by the UK as the State of Palestine to be unlawful.

Even so, UK officials fear the announcement could cause an early setback in Burnham’s relationship with Trump.

To defuse a backlash from the Trump administration, British diplomats privately informed the US that the sanctions are largely symbolic and will have no tangible impact on the UK’s broader trade or security ties with Israel, according to sources familiar with the discussions.

The proposals were drawn up after Israel decided to issue tenders for the construction of 1,200 settlement housing units in an area of the West Bank.

Disputes between Israeli settlers and Palestinians have intensified in recent months as Israeli Prime Minister Benjamin Netanyahu faces a difficult battle to retain his seat in a general election scheduled for 27 October.

Burnham joined the leaders of Canada and five European governments, including France, Germany, and Italy, in signing a statement that condemned the housing plan as “unacceptable” and urged Netanyahu to withdraw the tender.

In a separate statement, German Chancellor Friedrich Merz condemned a call by Israeli National Security Minister Itamar Ben Gvir for “nightly assassinations” in Gaza.

Burnham is eager to demonstrate early to the Labour Party that he is adopting a more critical approach toward Israel than his predecessor, Keir Starmer.

Although Starmer hardened his stance against Israel during his two years in office, including by formally recognising the State of Palestine, his initial refusal to demand that Netanyahu halt military operations in Gaza divided the party.

This division led to a decline in Labour’s poll ratings and boosted electoral gains for the Green Party across the country.

Burnham’s return to Parliament last month led to Starmer’s resignation. Burnham apologised for Labour’s handling of Israel’s military operation in Gaza under his predecessor, stating that the party “did not adopt the right stance”.

Last month, Burnham’s new Defence Secretary, Wes Streeting, who faced intense competition from a Muslim independent candidate in his northeast London constituency at the last general election, stated that Israel had fallen “short” of international standards.

US Ambassador to Israel Mike Huckabee told the BBC’s “Newsday” programme that there would “undoubtedly” be a US response.

Accusing the Labour Party of “discriminating against the Israeli government”, Huckabee said: “It is like throwing a rock and not knowing where it lands. The UK is a sovereign country and can do as it pleases, but so is the US.”

Republican Florida Congressman Randy Fine also warned that British firms would be barred from doing business with local governments in the state if sanctions were imposed.

In a post on X, Fine said: “Florida has made its stance clear. Any company—or country—that boycotts Israel will be boycotted by Florida.”

Labour MPs and Jewish groups have warned the government that any sanctions against the settlements could amount to a “de facto boycott” of Israeli goods and compromise the safety of British Jews.

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