The conflict between Iran and the US continues with a relentless wave of attacks, now in its seventh night, and developments over the past week paint a truly dire picture across the region, both humanitarianly and economically.

The situation on the ground has expanded significantly. Last night, the US targeted six bridges on Iran's southern coast, including the key port city of Bandar Abbas overlooking the Strait of Hormuz, killing at least eight people overnight. Iran retaliated by continuing attacks against its Kurdish allies in Iraq, killing at least eight people, and striking a water treatment plant in Kuwait, highlighting the region's water security vulnerability. The US State Department urged American citizens to reconsider travel plans to the Middle East, stating that the security environment is "complex and carries the potential for unexpected escalation."

On the economic front, the picture is a layered one, with both direct and indirect effects intertwined. The International Energy Agency stated that the impact of this crisis on the oil market is even heavier than the combined effects of the two oil shocks of the 1970s, and on the gas side, it surpasses the impact of the Russia-Ukraine war. The World Trade Organization estimates that if oil and gas prices remain high until the end of the year, global GDP growth could fall by 0.3 percent, with heavily energy-importing regions like Europe potentially experiencing at least an additional 1 percent growth loss. An early estimate from Goldman Sachs suggests that if the conflict continues, Kuwait and Qatar's GDP could contract by 14 percent, while Saudi Arabia and the United Arab Emirates could see contractions of 3 percent and 5 percent respectively.

It's important to note that this picture isn't entirely one-sided, as, like any crisis, it has created unexpected gains for some parties. Saudi oil company Aramco increased its profits by 26 percent in the first quarter of the year thanks to rising prices, as it was able to redirect a large portion of its exports via the East-West pipeline, without relying on the Strait of Hormuz. This is a striking example of how the same crisis can produce unequal results even within the region, with exporters dependent on the strait suffering heavy losses while producers with alternative routes can profit.

On the US economy side, there are also tangible consequences affecting daily life. War-related uncertainty has driven 30-year mortgage interest rates up to 6.52%, increasing monthly payments on a $400,000 home purchase by approximately $110. The World Bank, in its report this month, lowered its 2026 global growth forecast to 2.5%, the lowest level seen since the coronavirus pandemic. The aviation and tourism sectors have also been severely impacted; flights from Dubai have decreased by two-thirds, and those from Doha by three-quarters.

As you mentioned, the risk on the inflation front remains the most critical issue. Modeling developed by Dallas Fed researchers shows that scenarios where the Bosphorus remains closed create significant upward pressure on US inflation, making central banks' interest rate cut plans more difficult or even postponing them altogether.

On the regional diplomacy front, there is still a glimmer of hope; the talks mediated by Pakistan and the mid-June agreement, which formally called for an end to the conflict, are theoretically still in effect, but the reality on the ground lags far behind. This contradiction—the difference between the diplomatic framework on paper and the ongoing conflict in practice—looks likely to remain a decisive factor for both regional economies and global markets in the coming weeks.

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