According to Xinhua News Agency, the spillover effects of the US-Israel-Iran conflict on the global economy are spreading from the fierce battle between bears and bulls in the capital markets to the tangible realities of production and daily life. From European airlines facing critical fuel shortages, to fertilizer shortages during the spring sowing season, and on to supply shortages of key raw materials for manufacturing, multiple shocks are rippling through the global economy, spreading from near to far and from localised areas to the wider economy.

Analysts point out that the current situation has wound a ‘warning spring’ on the global economy; as key deadlines approach one after another, global economic risks are steadily mounting.

Aviation Fuel Shortage: The 23-Day Warning Threshold Is Hard to Maintain

In Europe, the approaching summer is typically the peak season for tourism and travel, but at present, the risk of flight cancellations due to rising aviation fuel prices has surged.

Fatih Birol, Executive Director of the International Energy Agency, stated in a recent media interview that Europe’s aviation fuel reserves “may only last about six weeks”. If the situation in the Middle East continues to disrupt oil supplies, many flights may be forced to cancel “very soon”.

Data indicates that Europe is the most dependent on Middle Eastern jet fuel. According to the IEA’s forecasting model, taking into account current European jet fuel stocks, if a way can be found to replace 75% of Middle Eastern imports, European jet fuel stocks could fall to the warning level—that is, below 23 days—in August; if only 50% can be replaced, they would fall to the warning level as early as June.

Calculations suggest that once European jet fuel stocks fall below 23 days, some airports will face “fuel shortages”, leading directly to flight cancellations. Currently, some European countries already have jet fuel stocks of less than 20 days.

The International Air Transport Association has warned that Europe could see widespread flight cancellations due to jet fuel shortages as early as the end of May. Barclays analyst Andrew Lebbenberg expects European airlines to cut flights between May and July this year due to jet fuel shortages.

Janiv Shah, an analyst at the Norwegian energy consultancy Rystad Energy, stated that European aviation fuel stocks are currently at their lowest level in three years. Against the backdrop of the conflict, weak fuel supply and rising prices mean that short-haul flights with narrow profit margins are particularly vulnerable. Furthermore, as low-cost carriers have not hedged their fuel purchases, their short-term financial costs are set to rise significantly.

Fertilizer Shortage: Third-Quarter Output May Fall

It is widely believed within the industry that the US-Israel conflict in Iran is causing disruptions to fertilizer transport and fuel shortages for agricultural machinery, whilst also impacting agricultural trade and financial markets, thereby creating a ‘multi-faceted crisis’ for global agriculture, the effects of which will be felt throughout the year. A surge in food prices is expected from the end of this year into next, making life even more difficult for many low-income households.

Data indicates that approximately one-third of global fertilizer trade must pass through the Strait of Hormuz. World Bank commodity data indicates that the price of urea, the most widely used nitrogen fertilizer, has risen rapidly since the outbreak of hostilities. In March, the average international price of urea stood at approximately US$726 per tonne, a significant increase from around US$472 in February.

US Department of Agriculture data shows that the area of land US farmers plan to sow with maize in 2026 has decreased by 3% year-on-year, with farmers switching to soya beans instead. This is because maize cultivation consumes large quantities of nitrogen fertiliser, whereas soya beans have a strong natural ability to fix nitrogen and therefore require relatively less fertiliser.

In Argentina, many farmers who had originally planned to grow wheat have now begun switching to crops such as barley and oats, as the cost of fertiliser during the early stages of wheat cultivation is too high.

Due to crop cycles, the impact of the conflict on agriculture is reflected with a certain degree of lag on the consumption side. The Food and Agriculture Organisation of the United Nations (FAO) has stated that current global grain stocks have, to some extent, cushioned the impact of the conflict, but risks are mounting.

Industry analysts note that the world has now entered the main planting season from April to June. If the impact of the conflict is not alleviated in the first half of the year, the third quarter will see a significant decline in grain production and tightening supplies. Risks such as rising food prices are expected to manifest in concentrated form from the end of this year to the beginning of next year, affecting the ‘food security’ and ‘vegetable baskets’ of people in many countries.

Material shortages: stocks may run out in two months

The impact of the conflict in the Middle East on global manufacturing is also becoming increasingly apparent. A recent survey by Reuters revealed that the conflict is disrupting global maritime and air transport networks, leading to logistical delays and exacerbating ‘imported inflation’, thereby posing a serious obstacle to the recovery of global manufacturing.

Analysis indicates that, in the short term, the conflict is driving simultaneous increases in energy, transport and chemical costs across global manufacturing. As tensions persist, inventory depletion is accelerating. According to industry practice, the inventory cycle for key raw materials at most manufacturing enterprises typically ranges from several weeks to two months. Should stocks become critically low or run out entirely, companies will be forced to adjust production capacity. If the conflict continues for three months, the risks facing global manufacturing will shift from “rising costs” to “shortages of key raw materials and components”.

Vidya Mani, an associate professor at the University of Virginia and an expert on global supply chains, stated that due to the conflict, production facilities in Qatar—a major global supplier of liquefied natural gas—have been damaged, leading to a severe shortage of helium, a gas that serves as a vital raw material for semiconductor manufacturing, healthcare and the aerospace industry. Mani noted that manufacturers using helium typically only stock enough to last two months. If the supply situation fails to improve, difficulties will arise across sectors ranging from automotive chips to mobile phone manufacturing.

Oxford Economics also pointed out that the helium shortage could impact the construction of artificial intelligence data centres, potentially leading companies to scale back their investment plans.

Furthermore, aluminium—widely used in manufacturing—is also at risk of shortages. As Gulf nations produce approximately 9% of the world’s aluminium, international aluminium prices have already reached their highest levels in over four years due to supply disruptions. Analysts believe that an aluminium shortage would affect production capacity across a range of industries, from product packaging to the automotive sector.

Viewed over a longer timeframe, inflation caused by the conflict will affect global real purchasing power, delaying the recovery process in some economies and exacerbating the risk of a contraction in global manufacturing demand. Whilst the pace at which different sectors and regions come under pressure may not be entirely synchronised, global manufacturing is currently showing a trend of localised disruptions spreading into systemic risks.

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