THE United States’ war against Iran has harmed the Iranian people, of course, but it has perhaps struck the people of the Global South equally starkly. From Dakar to Dhaka, from Suva to Maputo, the most immediate consequence is not military but economic. The burden of this war is not carried primarily by Washington or by the financial centres of the North Atlantic. It is carried by the peoples of the developing world, who face rising fuel costs, inflation, mounting debt burdens, renewed pressure on already fragile public finances, and fear of multiple-year high food prices due to the increased cost of fertilisers.

The contemporary world economy remains organised around a profound inequality. The countries of the Global North possess greater financial buffers, strategic reserves, diversified energy systems, and currencies that are accepted globally. When it comes to petroleum, these countries have access to the North Sea oil, the US and Canadian shale oil and oil sands, the Brazilian offshore fields, the West African oil, and – increasingly – the Venezuelan oil. Most countries of the Global South possess none of these protections. When geopolitical conflict disrupts energy markets, they are exposed first and hardest.

STRAIT OF HORMUZ SHOCK

This reality has been highlighted by the United Nations Conference on Trade and Development (UNCTAD), whose recent assessment of disruptions in the Strait of Hormuz demonstrates how military escalation involving Iran reverberates throughout the developing world. The Strait of Hormuz remains one of the most important energy corridors on the planet. Roughly one-fifth of global oil flows pass through this narrow waterway. Any disruption immediately affects energy prices and shipping costs across the world. According to a recent UNCTAD report (Strait of Hormuz Disruptions: the burden of oil price shocks on vulnerable economies, 2 June), 65 out of 75 vulnerable economies, classified as Least Developed Countries (LDCs) and Small Island Developing States (SIDS), depend on imported oil. These countries are home to nearly one billion people. For them, higher oil prices are not merely an inconvenience. They create difficult choices between paying for fuel imports and funding public services such as healthcare, education, housing, and food support.

The numbers are stark. UNCTAD estimates that a 50 percent increase in oil prices would raise the annual oil import bill of vulnerable economies by approximately $20.4 billion. Least Developed Countries alone would absorb an additional burden of $16.1 billion, while Small Island Developing States would face another $4.3 billion in costs. For wealthy countries, such increases are serious but manageable. For countries already struggling under debt obligations and austerity programmes, they can be devastating. Many governments in Africa, Asia, Latin America, and the Pacific entered this period of instability weakened by the economic consequences of the COVID-19 pandemic, rising global interest rates, and the lingering effects of the war in Ukraine. Fiscal space is already constrained. Public debt levels remain elevated. A new oil shock arrives when many countries have little capacity to absorb another external blow.

The impact extends far beyond fuel stations. Oil is embedded in almost every aspect of economic life. Higher fuel prices increase transportation costs, which in turn raise food prices. Agricultural production becomes more expensive because modern farming depends on fuel and petrochemical inputs. Manufacturing costs rise. Electricity generation becomes more expensive in countries dependent on imported petroleum products. Inflation spreads through entire economies. The result is a familiar pattern. Workers face higher living costs while wages stagnate. Governments are pressured to reduce development spending to finance energy imports. Public investment projects are delayed or cancelled. Poverty reduction efforts slow. Social tensions intensify.

UNCTAD notes that oil prices have risen sharply during the current period of military escalation, with crude oil prices increasing by more than 40 percent and gasoline prices by more than 50 percent relative to earlier levels. These increases are transmitted rapidly to import-dependent economies that lack the financial resources to shield their populations from external shocks. What is striking is that the countries paying the highest price have little influence over the decisions that produced this crisis. Small island states in the Pacific did not choose confrontation with Iran. Least developed countries in Africa were not consulted about military escalation in West Asia. Yet they are required to absorb the consequences through higher import bills, inflation, and slower growth. This is one of the central contradictions of the international order. Decisions taken in Washington, Tel Aviv, or other centres of military power generate economic consequences that are distributed globally but unevenly. Those least responsible for the crisis frequently bear its heaviest costs.

The developing world has experienced this pattern repeatedly. The oil shocks of the 1970s triggered debt crises across the South. The financial crisis of 2008 originated in advanced economies but devastated employment and growth in poorer countries. The pandemic revealed deep inequalities in access to medicine and finance. Today, geopolitical conflict in West Asia threatens to deepen another cycle of instability. The issue is therefore not merely energy security. It is development itself. Every additional dollar spent on fuel imports is a dollar unavailable for schools, hospitals, climate adaptation, public transport, or industrial investment. For countries already facing severe climate vulnerabilities, the diversion of resources toward energy imports further undermines long-term development prospects.

INDIA’ ENERGY VULNERABILITY

India occupies a distinctive position in this crisis. As one of the world’s largest energy importers, it remains highly exposed to instability in West Asia. Although India has diversified some of its energy sources and expanded strategic petroleum reserves, imported crude oil continues to play a central role in its economy. Disruptions in the Strait of Hormuz therefore pose immediate risks to inflation, trade balances, and fiscal planning. Higher oil prices affect India through several channels. Transportation costs increase, raising prices across supply chains. Fertiliser production becomes more expensive, affecting agriculture. Manufacturing sectors dependent on imported energy inputs face higher costs. The government’s efforts to maintain price stability become more difficult as imported inflation rises.

India’s economic relationship with Iran has historically been significant and multidimensional. For decades, Iran was one of India’s principal energy suppliers; before the reimposition of US sanctions, Iran accounted for roughly 10–16 percent of India’s crude oil imports and was among New Delhi’s top three sources of imported oil. The two countries also explored cooperation in natural gas, including the proposed Iran–Pakistan–India pipeline and the development of Iran’s Farzad-B gas field. Beyond energy, Iran occupies a central place in India’s Eurasian connectivity strategy. Through the development of the Chabahar Port on Iran’s southeastern coast and its integration with the International North-South Transport Corridor (INSTC), India seeks direct access to Afghanistan, Central Asia, Russia, and Europe while bypassing Pakistan. In 2024, India and Iran signed a ten-year agreement for the operation and development of Chabahar, underscoring the port’s strategic importance as a gateway for trade and regional influence.

However, these ties have been constrained by US sanctions and broader geopolitical pressures. Following Washington’s withdrawal from the Iran nuclear agreement and the reimposition of sanctions, India halted imports of Iranian crude oil in 2019 and scaled back several planned investments. Sanctions-related uncertainty has also complicated the future of Chabahar and other bilateral projects, imposing upon New Delhi a choice to downplay its strategic and economic interests in Iran for its security partnership with the US-led hyper-imperialist bloc. Despite these constraints, India continues to view Iran as a critical geopolitical partner. Chabahar remains one of the few viable routes through which India can project economic influence into Afghanistan and Central Asia, and both governments have repeatedly reaffirmed their commitment to maintaining cooperation in trade, transport, and regional connectivity even amid sanctions and regional instability.

For ordinary Indians, the consequences of escalating conflict are not primarily geopolitical. They appear in higher fuel prices, rising costs of essential goods, and greater uncertainty about economic prospects. For a country still confronting widespread inequality and developmental challenges, sustained energy shocks can undermine gains in poverty reduction and social welfare. The lesson is clear: military escalation in West Asia is not a distant regional issue. It has direct consequences for the livelihoods of hundreds of millions of Indians.

DIPLOMACY BEFORE DISASTER

The tragedy is that the world already possesses the knowledge required to avoid such outcomes. Diplomatic engagement, regional security arrangements, and cooperative development strategies have repeatedly demonstrated their effectiveness. Yet military solutions continue to dominate policy.

The developing world has little interest in another prolonged conflict in West Asia. Its interests lie elsewhere: in stable energy markets, affordable food, debt relief, industrial development, climate adaptation, and social progress. The priorities of the Global South are fundamentally developmental, not military. As UNCTAD’s assessment makes clear, the costs of the present crisis are already measurable. Nearly one billion people in vulnerable economies face higher energy costs and increasing economic pressure. The question is not whether the burden exists. It is who bears it. Once again, the answer is the same: the poorest countries and the poorest people are paying the highest price for a conflict they neither initiated nor control.