The Fallout of War: How the U.S.-Israeli Conflict with Iran Impacts the Global South

As the conflict between the United States, Israel, and Iran escalates, the ripple effects are being felt far beyond the Middle East. The poorest members of the Global South—countries in Asia, Africa, and the Middle East—are particularly vulnerable as they bear the brunt of soaring energy costs. This geopolitical struggle has not only intensified the crisis in these regions but threatens to destabilize economies that are already fraught with challenges.

Energy Dependency and Economic Anxiety

With the closure of the Strait of Hormuz and increasing attacks on oil and gas facilities across the Gulf, energy prices have surged. Nations like Pakistan, Bangladesh, and Sri Lanka are caught in a vice of dependency on imported energy and limited fiscal resources to cushion the blow. This situation has led governments to scramble for immediate solutions to mitigate the impacts of skyrocketing fuel prices.

In Pakistan, where around 80% of energy supply is imported from the Gulf, an economic crisis looms large. Authorities are implementing austerity measures, such as closing schools and introducing a four-day workweek for government employees. Pakistani Prime Minister Shehbaz Sharif, facing public pressure and dwindling reserves, recently chose to delay a hike in fuel prices, opting instead to “bear the burden.” However, experts warn that these measures may not be enough. S Akbar Zaidi, the executive director of the Institute of Business Administration in Karachi, asserts that the upcoming weeks could witness deteriorating conditions as economic disruptions and price shocks take their toll.

Fuel Rationing: A Fraying Safety Net

The situation is similarly dire in Bangladesh, where approximately 95% of its oil is imported. Petrol pumps are running dry despite the government’s attempts at fuel rationing, and fears of running out of reserves loom large. Sri Lanka, still recovering from an economic meltdown, has declared mandatory public holidays to conserve fuel. Such measures underscore the lengths to which these governments are willing to go to manage circumstances that are spiraling beyond their control.

Egypt, already one of the biggest energy importers and facing significant debt, is also feeling the heat. The government has imposed early closing hours for malls and cafes while initiating price hikes of 15 to 22% on fuel and cooking gas. Egyptian President Abdel Fattah el-Sisi has pointed to the need for these increases to avoid even harsher consequences.

Currency Depreciation: A Double-Edged Sword

Adding fuel to the fire, many developing countries are experiencing currency depreciation against the US dollar, largely due to investor behavior during times of geopolitical uncertainty. Economies like Indonesia and the Philippines are grappling with near-record low currencies, further driving up import costs, including oil.

The financial strain translates into a difficult reality for citizens in less advanced economies, where a significant portion of household income goes toward fuel and food. This leaves them particularly exposed to rising living costs. Governments often attempt to mitigate these challenges by subsidizing fuel and food, but with shrinking fiscal buffers, these methods are becoming increasingly unsustainable. As austerity measures take hold and hyperinflation rises, the potential for social unrest looms large.

The Prolonged Suffering of Developing Economies

Countries already grappling with high debt and reliance on imports—like Pakistan, Egypt, and Bangladesh—are among the most vulnerable. According to a recent analysis by the Centre for Global Development, these nations face a combination of inflation, currency pressure, and fiscal strain, making them particularly susceptible to geopolitical turmoil.

As the conflict between the U.S. and Iran shows no sign of abating, experts fear that conditions will worsen. Khalid Waleed from the Sustainable Development Policy Institute highlighted the impending spike in food prices in Pakistan, noting that rising transport costs are bound to affect supermarket costs. Diesel is essential for the agricultural sector; increased freight charges could make everyday necessities, like flour and fertilizer, unaffordable.

Impending Crisis in the Kitchen

With Pakistan’s wheat harvest set to begin soon, the implications of high fuel prices become even more alarming. Waleed has pointed out that if diesel costs remain elevated during the harvest period, the financial burden will be immense. The cost of agricultural machinery and transportation—critical elements in getting food from farms to markets—will ultimately drive food prices up at a point when households are already stretched thin.

The ramifications don’t just end with volatile prices; they extend to food insecurity and diminished access to essential goods. The countries that struggle the most are those where households have little to no financial resilience, thereby increasing the risks of hunger and malnutrition.

As the United States-Israeli conflicts unfold and their repercussions echo through the Global South, one thing remains apparent: the weakest and most vulnerable are bearing the brunt of this turmoil, and the path forward looks increasingly uncertain.