Food and transportation prices are rising across the globe, driven by the impact of oil, LNG, and fertilizer restrictions stemming from the Strait of Hormuz crisis. Countries like the USA, with diversified production and energy sources, are faring better amid rising costs for basic crude-based fuels and fuel-product resources. Rinaldo Brutoco, founder of the environmental non-profit World Business Academy, states, “I believe that the USA will formally be in recession by the 3rd or 4th quarter this year. That economic decline will result in a combination of high inflation and lower gross domestic product. When those effects are combined (technically called “stagflation”), coupled with an already weakened global trading system, and the accelerating cost of fuel, a global recession is highly likely." On the other hand, it seems that an international indication for a severe economic backlash is not as likely as a “normal” recession at this point. According to Canary Wharfian, “The IMF's most recent forecast pegs the effect of the Iran conflict--and the associated Strait of Hormuz--at -0.2% of global GDP, meaning that before the conflict, the IMF had growth at 3.3% and now has it at 3.1%. Equating this to dollars, that is an assumed knock to global GDP of only $225 billion. For a projected 2026 global economy of $116 trillion, the $225 billion knock is not incredibly large.” The impact projection, both in the USA and the global community, changes in severity as the length of problems in the Strait of Hormuz increases.
Economic shocks in the short run, such as supply chain disruptions and compliance issues, interrupt energy domestic supply and demand. With rising loads as a continued interest, financeable and scalable ways to add domestic energy generation are critical. Offering perspective on the subject, Bryen Alperin, Managing Director at Foss & Company, quoted, “EIA said in January that U.S. electricity demand is now expected to post its strongest four-year growth since 2000, driven largely by data centers, and that utility-scale solar will be the fastest-growing source of U.S. generation through 2027. Battery storage is also scaling rapidly, with Reuters reporting U.S. installations reached 58 GWh in 2025, and another 60 GWh are expected in 2026.” This points to solar and storage tax credits of interest. However, the Nuclear Regulatory Commission (NRC) underscores recent reforms already included in nuclear-related incentives that are more security-focused for a venue that has not faced tax credit reductions. During a short-term conflict (at this point), such as the Strait of Hormuz, existing inflexible infrastructure makes it difficult to adjust energy sources and demand without fragmentation.Â
Typical first reactions are to remain insulated from the pressure of crude supply depletion and to expand energy production elsewhere. The U.S. has followed this pattern. Some of the solutions needed can be found in clean energy. According to Mike Naughton, CEO and Founder of Integrity Energy, “Today, 91% of new renewable energy projects are more cost-effective to build and operate than fossil fuel alternatives. For more perspective, utility-scale solar is 41% cheaper and onshore wind farms are 53% cheaper than the lowest-cost fossil fuel options, making them a smart addition to any power grid. Beyond the power grid itself, for every dollar invested in renewables, three times as many jobs are created compared to the fossil fuel industry.” This certainly argues for sustainable renewable energy’s calling card.
Effects of trade, inflation, and financial volatility for the international economic stage, especially around the energy industry, are not going away overnight, regardless of when the Strait of Hormuz conflict ends. On the other hand, these impositions on the economy will be quicker to “bounce back” if the Strait of Hormuz crisis ends quickly. Prolonging the situation affects even the most resilient of countries on the global stage. In the U.S., large-scale energy industry planning delays and volatile energy interconnections have disrupted the immediate energy industry systems’ pricing and supply chains.Â
Even when the Strait of Hormuz fully reopens without conflict, U.S. and global economic recovery will not be immediate. Energy Workforce & Technology Council President Tim Tarpley states, “Long term, the expectation for the global economy is that countries will be forced to re-evaluate their energy security and make strategic decisions in their own best interests. Each country faces different risks and has varying access to domestic energy resources, so the path forward will not be one-size-fits-all.” The U.S. is better positioned and equipped for a long, drawn-out conflict at the Strait of Hormuz than many other countries. As a global leader, the U.S. needs to be aware of those vulnerabilities in less self-sufficient populations and the headwinds of inflation that affect everyone. At this point, the economic impact of the energy industry’s instability on Gross Domestic Product (GDP) continues into the end of the year. Batten down the hatches while the U.S. and global economies adjust to the Strait of Hormuz and the outfall of crude depletion that was destined to happen sooner or later, regardless of war.
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