The ongoing Iran war is putting pressure on the global economy as rising energy prices and uncertainty weigh on business activity across major economies. 

Business surveys released in March showed slower growth, higher production costs and growing concerns about inflation as disruptions to energy supplies continued. (Reuters)

The euro zone’s composite Purchasing Managers’ Index (PMI), which tracks activity in manufacturing and services, fell to 50.5 in March from 51.9 in February. Although a reading above 50 indicates growth, the latest figure showed that business activity was close to stagnating.

In the United States, the composite PMI declined to 51.4, its lowest level since April 2025. Japan’s index also fell to 52.5 from 53.9, pointing to slower growth.

The UK recorded its slowest business activity growth in six months, while manufacturing costs rose sharply. The surveys also showed weaker business confidence in France and slower growth in Germany. (Reuters)

The conflict has disrupted energy supplies and shipping routes, including the Strait of Hormuz, through which around one-fifth of the world’s oil passes. Higher oil and gas prices are increasing transportation and manufacturing costs, putting pressure on businesses and consumers.

In India, private-sector growth fell to a three-year low in March, while input costs rose at their fastest pace since June 2022. Companies faced pressure on profit margins as operating expenses increased.

Higher energy prices could push inflation up and complicate decisions for central banks, which may need to keep interest rates elevated to control price pressures.

Economists have warned that the longer the conflict continues, the greater the risk to global growth. The impact will depend largely on how long energy supplies remain disrupted and how quickly prices stabilise.

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