Middle East crisis could cost global economy up to $1 trillion Study warns of global economic shock

A potential energy crisis in the Middle East could cost the global economy around $1 trillion, while oil and gas companies continue to post record profits amid sharply rising energy prices, according to an analysis reported by The Guardian, which cites research by the climate organisation 350.org.

Experts estimate that even with a rapid recovery of supply flows and normalisation in the Strait of Hormuz, global economic damage could reach around $600 billion. If disruptions persist, total losses could exceed $1 trillion. These costs are driven not only by higher energy prices but also by a chain reaction including rising inflation, higher food and fertiliser prices, reduced business activity, and increased unemployment.

At the same time, not all market participants are experiencing losses. Oil and energy companies are benefiting from higher revenues due to the price surge. bp, for example, previously reported more than a twofold increase in quarterly profit, attributing it to higher oil prices and strong trading performance.

The report authors and climate groups, including 350.org, describe the situation as an “uneven distribution of risk and reward,” arguing that economic losses are primarily borne by states and consumers, while corporations gain windfall profits. Activists are calling for a windfall tax on oil companies, with revenues directed toward social protection and renewable energy development.

According to 350.org executive director Anne Jellema, “oil majors will report astronomical first-quarter profits, much of it earned on the back of a war that has already killed thousands and impoverished millions.”

These issues are being discussed at an international conference in Santa Marta, Colombia, where more than 50 countries and thousands of participants are considering accelerating the phase-out of fossil fuels. Delegates from several states warned of rising costs and fiscal pressure, including the Marshall Islands, which reported the need to cut government spending, and Malawi, which highlighted risks to social programs such as education.

In a broader context, experts note that governments worldwide continue to provide over $1 trillion annually in direct and indirect subsidies to fossil fuels. Reform advocates argue that reallocating these funds could reduce poverty and accelerate the global energy transition.

By Jeyhun Aghazada