The Iran War: A New Shock to Global Trade

The war with Iran is being fought with missiles, aircraft and naval forces, but some of its most consequential effects are disruptions impacting energy markets, international shipping, insurance, supply chains, and prices, while adding another layer of sanctions and tariff risk to international trade. The result is particularly significant because the Strait of Hormuz, at the center of the conflict, is one of the most important arteries in world commerce.

The present trade consequences did not begin with the war. Iran has been subject to an extraordinary network of U.S. trade and financial sanctions for nearly half a century (see table at end of article). What has changed during the last 18 months is the combination of increasingly aggressive economic restrictions with actual military disruption of the Persian Gulf. Sanctions that once sought principally to prevent Iran from selling oil are now operating alongside disrupted transportation routes, higher freight and insurance costs, and the threat of additional U.S. tariffs against countries that continue trading with Iran.

Decades of Economic Pressure from All U.S. Administrations

U.S. economic restrictions on Iran date to the 1979 seizure of the American Embassy in Tehran, when President Carter froze Iranian government assets and imposed restrictions on trade. President Reagan later imposed restrictions in response to Iran’s support for terrorism, while the Clinton Administration prohibited most U.S. trade and investment with Iran and targeted investment in Iran’s petroleum sector. By the Obama Administration, sanctions evolved from restrictions on direct U.S.-Iran commerce into secondary sanctions designed to force foreign banks and companies to choose between doing business with Iran and retaining access to the U.S. financial system.

The 2010 Comprehensive Iran Sanctions, Accountability, and Divestment Act, or CISADA, empowered the United States to restrict the U.S. correspondent-banking access of foreign financial institutions engaged in specified transactions with sanctioned Iranian entities.  The 2015 Joint Comprehensive Plan of Action, or JCPOA, temporarily changed that trajectory. Iran agreed to nuclear restrictions and international monitoring in return for relief from significant nuclear-related U.S., European Union, and United Nations sanctions. Even then, however, the general U.S. prohibition on most direct trade with Iran and sanctions relating to terrorism, missile proliferation, and human-rights abuses remained. 

President Trump withdrew the United States from the JCPOA in May 2018 and reimposed the suspended sanctions. By November 2018, Treasury had sanctioned or redesignated more than 700 individuals, entities, aircraft and vessels in a single action, including Iranian banks, shipping companies, and energy-sector targets. 

The Biden Administration later attempted—unsuccessfully—to restore mutual compliance with the JCPOA while continuing sanctions enforcement and imposing additional designations relating to Iran’s petroleum trade, missile and drone programs, human-rights violations, and support for regional armed groups.

The second Trump Administration returned to a policy of “maximum pressure.” On February 4, 2025, President Trump directed agencies to intensify sanctions enforcement and deny the Iranian government access to oil revenues and the international financial system. Treasury subsequently began a sustained campaign against the network of vessels, brokers, trading companies, banks, refineries, and intermediaries (with a focus on China) that permitted Iran to continue exporting petroleum despite existing sanctions.  In February 2025 Treasury sanctioned more than 30 persons and vessels involved in brokering or transporting Iranian petroleum, including entities in China, India, Hong Kong and the United Arab Emirates. In April, Treasury directly sanctioned a Chinese independent or “teapot” refinery that it said had purchased more than $1 billion of Iranian crude.  By May 2025 Treasury reported that the Administration had already taken 19 Iran-related sanctions actions covering 253 individuals, entities, and vessels. 

From Sanctions to War — and Tariffs

In February 2026, President Trump issued an executive order authorizing an additional tariff on goods from countries that directly or indirectly purchase or otherwise acquire goods or services from Iran. The order uses an additional 25 percent duty as an example, while leaving the actual rate and application to country-specific determinations by the Administration. That measure is potentially much broader than an ordinary sanction, that primarily attempt to isolate Iranian persons, financial institutions, petroleum exports, and counterparties from participating in prohibited transactions. The 2026 tariff authority potentially reaches the ordinary exports of third countries if a country continues trading with Iran so companies exporting any type of products to the United States could face higher U.S. tariffs even though the company itself has never conducted business with Iran.

Military hostilities beginning in late February transformed the economic consequences again. Physical access to the Persian Gulf, particularly the Strait of Hormuz, became an immediate commercial concern. A temporary June ceasefire produced an agreement contemplating restoration of shipping, relaxation of some oil restrictions, and negotiations over broader sanctions relief. OFAC issued an authorization permitting certain Iranian crude oil, petrochemical and petroleum transactions on June 21. Following renewed hostilities, however, Treasury revoked that authorization effective July 7 and substituted a wind-down license. 

The result is a trade regime that can change almost as rapidly as events on the battlefield. Importers, exporters, banks, vessel owners, insurers and freight forwarders must therefore consider not only whether a transaction is permitted today, but whether the authorization supporting it may disappear while the cargo is in transit, or payment remains outstanding.

Why the Strait of Hormuz Matters to Everyone

The Strait of Hormuz connects the Persian Gulf to the Arabian Sea and provides the principal maritime outlet for some of the world’s largest oil and natural-gas producers. Its importance extends well beyond Iranian petroleum. Saudi Arabia, Iraq, Kuwait, Qatar, and the United Arab Emirates all rely heavily on Gulf shipping.

The U.S. Energy Information Administration estimated that approximately 20 percent of worldwide liquefied natural gas (LNG) trade passed through Hormuz in 2024. Qatar alone shipped approximately 9.3 billion cubic feet per day through the strait, and 83 percent of LNG passing through Hormuz was destined for Asian markets. China, India and South Korea together accounted for more than half of those LNG flows.  The Iran war has converted that geographic concentration into a global price risk. Reuters reported on July 22 that Brent crude settled at $94.07 per barrel after rising more than three percent in one day amid threats to Gulf and Red Sea transit routes. Those increases have already reached consumers. Reuters reported on July 20 that the U.S. national average gasoline price had again exceeded $4 per gallon, more than 30 percent higher than when hostilities intensified in late February. 

The economic effects do not stop at gasoline. Oil and natural gas are inputs throughout industrial production. Higher crude prices increase the cost of petrochemicals, plastics, fertilizers, and transportation. Higher marine fuel prices increase freight costs. Rerouting vessels increases sailing distances and ties up shipping capacity. Greater risks of vessel damage or seizure increase insurance premiums. Airlines face higher jet-fuel costs. Manufacturers ultimately pay more to move raw materials, components, and finished goods.

Recent LNG developments illustrate how a temporary military shock can also cause longer-term changes in trade patterns. Reuters reported that Asian and European LNG buyers are pressing Gulf suppliers for more flexible contract terms and stronger delivery guarantees after the Hormuz disruption exposed the geographic vulnerability of Gulf supply. Buyers are simultaneously considering greater diversification toward the United States, Canada, and other LNG sources. 

Thus, even an eventual ceasefire may not simply restore the prewar trading system. Companies that have experienced interrupted deliveries, sharply higher insurance costs or uncertainty over the availability of Gulf shipping may permanently diversify suppliers and transportation routes.

The Broader Trade Effect

The Iran war affects trade through three overlapping channels—sanctions and tariffs, physical disruption of energy and shipping, and the resulting price/risk premium throughout global supply chains. These global economic effects arise indirectly.

• First, the conflict restricts the supply and raises the price of globally traded energy.
• Second, it increases transportation and insurance costs for goods having nothing to do with Iran.
• Third, sanctions expose foreign companies, vessels, and financial institutions to U.S. enforcement even where the underlying commerce occurs entirely outside the United States.
• Fourth, the new tariff authority creates the possibility that countries continuing to trade with Iran could face additional duties on unrelated exports to the U.S., and
• Fifth, businesses must contend with unusually rapid policy change. A ceasefire may reopen shipping lanes and produce sanctions relief, but renewed attacks can reverse those measures later, such as Houthi attacks on Red Sea shipping.

For international traders, the practical lesson is that the Iran conflict cannot be treated as merely a Middle Eastern geopolitical event. It has become another significant variable in global sourcing, transportation, energy costs, tariff exposure and sanctions compliance. Companies with no Iranian customers and no Iranian suppliers may nevertheless experience its effects through fuel prices, freight rates, insurance premiums, supplier disruptions, and tariffs on goods originating in countries that continue trading with Iran.

Whether those consequences prove temporary will depend heavily on the durability of any future ceasefire and, above all, the restoration of dependable commercial passage through the Strait of Hormuz. Until that occurs, the economic risk generated by the war will extend considerably farther than the Persian Gulf.

Iran Sanctions and Trade Measures: Timeline