The war involving Iran is shaping up to be an energy shock, not just an oil shock, with broader implications across global markets and supply chains, according to Bank of America.

While oil prices have surged amid disruptions around the Strait of Hormuz, analysts note that the global economy today is less directly dependent on than in past crises. Instead, vulnerabilities have shifted toward other parts of the energy complex, including , refined fuels and key industrial inputs such as fertilizers.

Bank of America said that although oil intensity per unit of GDP has declined over decades, the economy has become more exposed to a wider set of energy inputs, making shocks more complex and harder to contain.

This means that even if crude flows normalize quickly, second-order effects could persist. Higher natural gas prices, for instance, can ripple through electricity markets, while fertilizer costs can drive food inflation, particularly in emerging markets.

Europe and developing economies are seen as especially vulnerable given their heavier reliance on imported energy and limited domestic buffers. In contrast, the U.S., with its relatively diversified energy base, may be somewhat insulated.

The current disruption has also highlighted how tightly interconnected energy systems have become. Supply shocks in one segment can cascade into others, amplifying price volatility and complicating policy responses.

BofA warned that even a short-lived conflict could leave lasting economic scars, as supply chains take time to rebalance and inventories are replenished. The result is a more prolonged drag on growth and upward pressure on inflation than a traditional oil shock alone would imply.

In that sense, the Iran conflict underscores a structural shift in global energy dynamics, where the risks extend well beyond crude oil and into the broader ecosystem that powers modern economies.
Source: Investing.com