How the war between Israel and Iran could reshape the global economy.

War between Israel and Iran: Global fallout, Caribbean impact, and how to prepare

As tensions rise in the Middle East, the possibility of a full-scale war between Israel and Iran is no longer unthinkable. What might begin as air strikes or cyberattacks could escalate into a broader regional war, drawing in global powers and triggering wide-reaching consequences. This article examines how such a conflict would affect the world, with a focus on the Caribbean and Trinidad and Tobago’s economy.

It also outlines critical steps individuals can take to prepare for the financial and supply disruptions that would likely follow. Understanding the economic and geopolitical stakes of a war between Israel and Iran is not just for foreign policy experts it is essential knowledge for everyone, from business owners in Port of Spain to students in Kingston.

Energy shock: Why oil prices will skyrocket

A war between Israel and Iran would immediately disrupt oil flows through the Strait of Hormuz, a narrow waterway through which roughly 20% of the world’s petroleum passes. Iran has previously threatened to close this strategic chokepoint if attacked, and in a wartime scenario, that threat becomes far more credible. Any disruption to this route would send oil prices soaring. Historically, during conflicts such as the Iran-Iraq War in the 1980s or the US invasion of Iraq in 2003, global crude prices jumped sharply.

If Brent crude moves from US$80 to over US$150 per barrel, the ripple effect would reach every economy. Trinidad and Tobago, while an energy producer, is also an importer of refined fuels. A sudden spike in prices would strain government fuel subsidies, raise transport and shipping costs, and inflate the cost of goods and services. Caribbean economies already grappling with inflation, public debt, and post-pandemic recovery would face renewed pressure.

Global markets in turmoil

Beyond oil, a war in the Middle East would likely shake financial markets. Investors tend to flee to safety during international crises. This would boost gold and US dollar holdings, but emerging markets—including those in Latin America and the Caribbean—would face outflows of capital. Trinidad and Tobago’s Heritage and Stabilisation Fund could buffer some of the shock, but the stock market and foreign investment landscape would turn volatile.

Tourism-dependent economies like The Bahamas, Jamaica, and Saint Lucia would see potential declines in arrivals, particularly from Europe, if global travellers choose to stay home amid rising fuel prices and safety concerns. Insurance premiums for regional shipping and air travel could also rise, squeezing the already narrow margins of Caribbean importers and logistics providers.

US and NATO response: A broader military escalation

If Israel launches a pre-emptive strike against Iranian nuclear sites or military infrastructure, Iran is expected to retaliate not just against Israel but also against US bases in the Gulf. The United States, which maintains military assets in Qatar, Bahrain, Kuwait, and the UAE, would likely respond with air and naval power. NATO involvement would not be far-fetched, particularly if any Western assets are attacked directly.

This escalation could quickly engulf Syria, Iraq, Lebanon, and Yemen, destabilising the entire Middle East. As the region slips into chaos, supply lines for everything from electronics to fertiliser may be disrupted. Caribbean importers, who already face container shortages and currency fluctuations, would have to navigate yet another wave of uncertainty.

Iran’s allies and the proxy network

Iran maintains a vast network of proxy groups, including Hezbollah in Lebanon, Hamas in Gaza, the Houthis in Yemen, and various Shia militias across Iraq and Syria. These groups may attack Israel’s borders or disrupt maritime trade routes, particularly the Red Sea and the Eastern Mediterranean. This would make shipping insurance more expensive and lead to rerouted trade flows.

Even though the Caribbean is geographically distant, it is economically tied to the same shipping and commodity markets. For Trinidad and Tobago, this could mean delayed imports of food, medicine, and industrial goods. With supply chains already fragile due to global inflation, another shock could drive up local prices.