Dr. Hamad Kasasbeh

In conventional crises, prices rise when supplies decline. In prolonged crises, however, prices can rise even while goods continue to flow, because markets begin pricing the possibility of disruption before it occurs. If tensions between the United States and Iran remain in a grey zone—neither a stable settlement nor a full-scale war—and navigation through the Strait of Hormuz and Bab el-Mandeb remains exposed to intermittent risk, uncertainty itself may become an unspoken economic cost. It raises shipping, insurance, and financing costs and delays investment decisions. Three costs then rise together: energy, financing, and uncertainty.

From this point, the impact begins to reach the U.S. economy. In June 2026, inflation stood at about 3.5%, energy prices were up roughly 15.7%, and the Federal Reserve kept interest rates in the 3.5–3.75% range. This creates a difficult equation: inflation remains above target, energy is adding renewed pressure to prices, and monetary policy has limited room to maneuver. Cutting rates too quickly could revive inflationary pressures, while keeping them high weighs on consumption and investment.

But the effects of this dilemma do not remain within the United States. The dollar accounts for about 57% of global official reserves and plays a major role in trade, finance, and debt, giving Federal Reserve decisions global reach. Persistently high U.S. interest rates make dollar borrowing more expensive and increase debt-servicing burdens outside the United States. If this coincides with higher oil and shipping costs, the world faces more expensive goods and more expensive financing. As risk rises, borrowing does not merely become costlier; investors also demand higher returns for taking on additional risk.

The dollar’s influence does not stop at financing costs. Oil priced in dollars becomes more expensive for an importer when the dollar strengthens against the importer’s currency, even if the price of a barrel does not rise further. When expensive oil is combined with a strong dollar, energy bills increase, demand may weaken, and investment in efficiency and alternatives may accelerate. The dollar therefore extends its influence from financial markets to global energy demand.

The outcome of this equation differs from one economy to another. Oil-exporting economies whose currencies are linked to the dollar benefit from higher oil revenues, while a stronger dollar may also improve their purchasing power for some imports. Yet a stronger currency can make their non-oil exports and services less competitive in some markets. This creates an important diversification paradox: what supports financial stability and purchasing power today may weigh on non-oil competitiveness if it persists.

By contrast, non-oil economies with dollar-linked currencies face a more difficult equation. They benefit from exchange-rate stability, but they do not receive the revenue gains available to energy exporters. If high U.S. interest rates coincide with rising energy and shipping costs, these economies may face more expensive financing and more expensive imports at the same time, with less room to cut domestic interest rates. Improving production efficiency and diversifying energy sources and trade routes therefore become more important.

At this point, the discussion moves beyond oil prices and interest rates to the movement of money itself. The role of the petrodollar returns to the forefront. The question is no longer only which currency is used to sell oil, but where oil revenues go and how they are reinvested in the global financial system. If uncertainty persists, governments and investors may increasingly diversify markets, assets, and settlement methods, even while the dollar remains the dominant currency. In that case, disruption to maritime routes may affect not only oil trade, but also global liquidity and capital flows.

As these pressures persist, companies also begin to change their behavior. They may increase inventories, work with a broader range of suppliers, seek safer routes, and move part of their production closer to their end markets. The crisis then begins to reshape the geography of trade, investment, and supply chains. As energy and financing costs accumulate and investment is delayed, uncertainty itself may become a drag on global growth, even without a full-scale war or a broad disruption to trade. The cost of uncertainty may also remain elevated even after energy prices decline, because investment decisions and the pricing of risk usually adjust more slowly than market prices.

Taken together, these links reveal the real nature of the risk. The most difficult scenario may not be a full-scale war or a complete closure of key waterways, but a global economy that remains for a long time between de-escalation and renewed confrontation: oil continues to flow, but at a higher risk cost; trade continues, but at greater expense; and interest rates fall more slowly than the economy needs. In conventional crises, the cost comes after the shock. Under prolonged uncertainty, economies begin paying before disruption actually occurs. The possibility alone can raise the cost of financing, trade, and investment, turning uncertainty from a market expectation into a real economic cost.