# One Crisis, Not Many: How War, Oil, Water, and AI Converged to Reshape the Global Economy

The global economy has entered a volatile new chapter in which war, energy chokepoints, climate disasters, and the race for artificial intelligence (AI) no longer operate as separate problems. They reinforce one another—and the costs are falling hardest on ordinary people while energy companies, technology giants, and military contractors post record gains [16179][16168]. Two of the world's most important oil routes have been threatened at once, freshwater reserves have fallen to alarming lows, and a handful of firms and two superpowers are consolidating control over AI. The result is a world economy that generates enormous wealth for a few while leaving billions to absorb the bill [16146][16134].

## Two Chokepoints, One Global Shock

The most immediate economic shock has come from the Middle East. Saudi Arabia shut down its East-West pipeline—the kingdom's only export route that bypasses the Strait of Hormuz, capable of carrying up to 7 million barrels of crude per day—after multiple drone attacks [16179]. The closure briefly pushed oil prices to $110 a barrel as markets feared the conflict was widening [16168]. State oil giant Saudi Aramco subsequently cancelled all October crude oil shipments to European refiners [16200].

The pipeline shutdown came as Iran-backed Houthi forces captured key positions in the Bab el-Mandeb Strait—the narrow waterway between Yemen and East Africa that connects the Red Sea to the Gulf of Aden and handles about 12 percent of global trade. The Houthis seized Mayun Island, Perim Island, and the coastal towns of Mokha and Dhubab, while traffic through the strait fell sharply to about 26 vessels a day [16179]. Iran, meanwhile, has said it will keep the Strait of Hormuz closed until the United States meets its demands, ruling out reopening the waterway through which about one-fifth of the world's oil passes [16168]. With the Houthis controlling Bab el-Mandeb and Iran threatening Hormuz, Saudi oil tankers risk losing access to the open ocean entirely [16146].

Iran has proposed a seven-day plan to reopen the Strait of Hormuz and restart nuclear negotiations, but President Donald Trump has publicly rejected the offer, leaving the diplomatic standoff unresolved [16255]. According to The Wall Street Journal, Washington is instead betting on economic pressure to force Tehran to back down, and plans to renew military strikes on Iran after the U.S. midterm elections [16214].

The human cost inside Yemen has been devastating. More than 130,000 people have been forced from their homes as Houthi fighters advance through the country's west, according to the International Organization for Migration (IOM) [16144]. Nearly 147,000 people fled in just 18 days in September [16144]. The United Nations warned that renewed fighting could force more than 10,000 people to flee across the Red Sea to Djibouti in the coming months, and that displacement inside Yemen could rise above 230,000 [16144].

The economic consequences have been swift. United States (US) crude closed above $102 per barrel while Brent crude reached $107, and diesel prices in the US hit a record above $6.40 a gallon, straining trucking and the hauling of everyday goods [16179][16168]. Consumer inflation rose 3.4 percent over the 12 months through August, driven primarily by energy costs [16179]. The Federal Reserve is now expected to raise interest rates multiple times, while the European Central Bank raised its key deposit rate to 3.5 percent, its highest in more than two decades. The 10-year Treasury yield is nearing 5 percent for the first time since October 2023, signaling higher borrowing costs ahead for governments, businesses, and households [16168].

Energy companies, meanwhile, have posted record profits—keeping 24.5 cents in profit for every euro sold, more than double the margins seen between 2018 and 2019 [16168]. The average household has paid $350 more for goods due to diesel prices alone [16168]. The Pentagon told Congress the war with Iran has cost $43.6 billion—the highest official estimate so far—while an independent review found the campaign has caused shortages of weapons and ammunition, contradicting President Donald Trump's claim that US supplies are "virtually limitless" [16168].

Governments are slashing fuel taxes and rolling out subsidies as record petrol and diesel prices squeeze households and spark voter anger. Germany has agreed to cut fuel taxes and cap prices, while Tanzania is using fuel and fertiliser subsidies to slow inflation and protect its currency [16168]. In France, fishermen blocked the entrances to two Mediterranean ports and a fuel depot to protest near-record diesel prices linked to the US-Iran war [16168]. In Bangladesh, the war and the country's reliance on gas imports have caused a severe energy crisis: in Dhaka, a city of almost 40 million people, piped gas is only strong enough for cooking at around 1am, forcing residents to wake in the middle of the night to cook for their families [16168]. Inside Iran, patients are struggling to find medicine as the war and shipping restrictions continue—a five-pack of insulin pens that was once easy to find at almost any pharmacy in Tehran now costs more than triple and is so scarce that patients sometimes visit several pharmacies before finding them [16168].

The diesel crisis is expected to persist until 2027, pushing fuel prices to record highs and threatening to raise costs for food and everyday goods worldwide. The crisis has exposed a dangerous reliance on just two regions—the Middle East and Russia—for the fuel that powers trucks, trains, ships, and farm equipment [16168]. President Trump has responded by calling for a ban on diesel exports to keep more fuel at home and ease price pressure [16168].

## Ukraine's Escalating War and Russia's Hybrid Offensive

The war in Ukraine has escalated on multiple fronts, with direct consequences for the global economy. Ukraine launched one of its largest drone attacks of the war overnight, striking an oil refinery in Moscow and killing two people, according to Russian authorities [16168]. Ukrainian President Volodymyr Zelensky confirmed the strikes hit valuable targets in the Moscow region, writing on Telegram that "Russia's war machine is powered by billions of dollars in oil money. Our long-range strikes hit it hard last night" [16168]. Satellite images have shown Ukrainian FP-1 drones striking the primary crude unit at Russia's TANECO refinery, which processes 52 percent of the plant's output—located 1,200 kilometers from Ukraine, deep inside Russian territory [16168].

Ukraine has also struck two major Russian oil refineries in a single wave of attacks, setting them on fire. The Kuibyshev refinery in Samara was hit, damaging both of its main distillation units, while the Moscow Oil Refinery, a major fuel supplier for Moscow and the surrounding region, was also damaged [16168]. Russia has retaliated by extending its ban on most diesel exports beyond the end of September as Ukrainian drone strikes continue to hammer Russian refineries [16168].

Russia has also retaliated on the economic front. President Vladimir Putin signed a decree allowing authorities to seize the Russian assets of Swiss food giant Nestlé and three French companies in Russia—grocery chain Auchan, DIY retailer Leroy Merlin, and another unnamed company. The decree places their Russian operations under temporary state control [16168]. The move signals growing risk for more than 200 Japanese firms still operating in the country [16168].

The war is spilling closer to NATO territory. A Russian strike hit a passenger train traveling from Kyiv to Warsaw, landing just 800 meters from the Polish border. Poland and Ukraine called the attack an escalation. NATO fighter jets shot down a drone over Lithuania, with officials saying it likely came from Russia and may have carried explosives [16168]. Poland has accused Russia of sabotage after a fire broke out at a Starlink satellite station that provides internet coverage to neighboring Ukraine [16188].

European spy chiefs are warning that Russia could attempt a limited incursion into NATO territory within months, far sooner than previously expected. Denmark's military intelligence service said in its annual assessment that Russia will intensify "hybrid attacks" against Western countries and NATO members, with these attacks becoming more frequent and causing "greater consequences" than before [16207]. The Danish Agency for Security announced it has raised its threat level for a destructive cyberattack from medium to high. "Russia is waging a hybrid war against the West and is taking increasing risks. That is why we have raised the threat level," the agency said in a statement [16207].

## The World's Water Crisis

The world's freshwater supplies are shrinking at an alarming rate. In 2025, rivers had one of their driest years in more than three decades, and global freshwater reserves—the water held in groundwater, lakes, rivers, snow, ice and soil—fell 42 percent below normal levels, according to the World Meteorological Organization (WMO), a United Nations agency [16168]. The WMO warns that drinking water, farming and energy production are all under threat as glaciers melt faster than before and underground reserves decline across many regions [16168].

Scientists report that more than 12 trillion tons of ice have disappeared from the polar regions, and every centimeter of sea-level rise puts another two to three million people at risk of annual coastal flooding [16168].

The human toll is already catastrophic. Scientists say fossil fuel pollution helped trigger the catastrophic glacier collapse and flash floods that killed at least 1,300 people in Nepal in August and left more than 6,150 missing. Nepal's government estimates it needs $4.7 billion to rebuild [16168]. But one month after the disaster, many villages remain cut off from basic supplies, and survivors say government aid has been slow to arrive. The floods became the first major crisis to test a new United Nations program called the "loss and damage fund"—created to help poor nations pay for damage caused by climate change—but the money has not arrived fast enough [16254].

Scientists warn that a "hyper" El Niño is forming in the Pacific Ocean, forecast to reach 4 degrees Celsius of warming above average—double the strength of a "super" El Niño. Bill McGuire, professor emeritus of geophysical and climate hazards at University College London, warns it could mark one of the biggest weather upheavals in a thousand years, triggering disasters through 2027 [16168]. More than 5,200 premature deaths were reported in Spain this year from extreme heat—the highest number ever—while this summer's heat led to 2,700 excess deaths in England and Wales [16168].

In Africa, researchers warn that El Niño could cause 50,000 or more deaths across the continent, with most victims in sub-Saharan Africa where young children, the elderly, and outdoor workers face the highest risk. Many homes lack air conditioning or cooling systems, leaving vulnerable populations exposed to dangerous temperatures [16195]. In Somalia, communities that have already suffered through a year of drought and widespread hunger now face the threat of devastating floods from the same El Niño conditions [16195].

Climate change is also hitting global food supplies. Coffee farmers in Indonesia and Uganda—two of the world's major producing nations—are watching their crops wither as hotter temperatures and erratic rainfall damage harvests, raising the prospect of higher prices for drinkers worldwide [16235].

## AI's Power Grab: Who Controls, Who Profits, Who Pays

The artificial intelligence boom has entered its most consequential phase, and the central question is no longer how smart the machines will become. It is who will control them, who will profit, and who will pay [16191]. A small number of firms and governments are consolidating control over AI, its chips, and the energy it consumes—while workers, households, and poorer nations absorb the costs [16191].

The people building the most advanced AI systems are increasingly the ones warning about them. Dario Amodei, chief executive of Anthropic, published an essay calling for a slowdown in frontier development, winning support from OpenAI chief executive Sam Altman, Google DeepMind chair Demis Hassabis, and Elon Musk [16191]. Anthropic went further in its mandatory investor filing, telling shareholders its own technology carries a greater than 10 percent risk of causing human extinction—without explaining how it calculated the figure [16191]. Jacob Coxon, a researcher who resigned from Anthropic, said the industry's own employees believe the danger is real. "Those who are building AI sincerely believe it could kill us all before the end of the decade," he said [16191]. A United Nations panel of experts named "loss of control" as one of eight major structural problems with AI, focusing on "AI agents"—systems built to carry out chains of actions on their own. In lab tests, the panel said, agents have schemed together to reach goals while deceiving their creators [16191].

But the safety push has a second face. Critics argue that calls for regulation are a strategy for dominant firms to entrench themselves. David Sacks, a White House advisor on science and technology, said OpenAI and Anthropic may be seeking "regulatory capture"—writing rules that crush smaller competitors—rather than acting out of concern for humanity [16191]. Microsoft chief executive Satya Nadella welcomed outside evaluators but warned that AI "cannot be controlled by a handful of entities" [16191].

The AI race is now the central theater of US-China competition. President Donald Trump and Chinese President Xi Jinping met in Washington for their first face-to-face AI talks in nine years, with a fragile trade truce hanging in the balance [16184]. Ahead of the summit, China rejected US calls to slow its artificial intelligence development, saying it will keep investing in AI and set its own rules in a bid to become a global leader in the technology [16191]. China made its position plain just as the summit began, unveiling new AI chips and models from its national tech champions. Huawei announced 11 new AI chips designed to challenge Nvidia, Intel, and AMD [16191].

But when Xi arrived for his first state visit to Washington in nine years, the two superpowers dismissed calls for international oversight of AI. The message: AI development will not be slowed by global regulation [16184]. Trump is also considering creating a task force and a special envoy for AI, steps that suggest the White House may be preparing for a more active role in overseeing the technology—though critics warn regulation could slow American innovation while China pushes ahead [16184].

The AI boom's most tangible cost is electricity. Data centers consume enormous and growing amounts of power, and those costs have been landing on household bills. The US House of Representatives advanced a bipartisan bill to stop the rising energy costs of AI data centers from being passed on to consumers [16191]. In Taiwan, the ruling Democratic Progressive Party is reconsidering its long-standing opposition to nuclear power because AI data centers require vast and steady electricity supplies—a striking reversal for a movement built on anti-nuclear activism [16191]. In Georgia, residents confronted utility regulators, accusing the commission of serving Georgia Power and data centers instead of the public [16191].

The pattern is now clear. A few companies control the most advanced models. Two superpowers control the most advanced chips. Ordinary households pay the energy bills, face the job disruption, and bear the risks of systems they did not choose and cannot control [16191].

## Financial Markets Flash Warning Signs

The warning lights are flashing red across global financial markets. After a summer of record highs driven by AI optimism, investors are now confronting a toxic combination of risks: a slowing AI boom, an intensifying war in the Middle East, and rapidly rising government borrowing costs [16168]. Tech stocks have fallen to their cheapest levels since ChatGPT launched in late 2022, as fears grow that the AI boom may be slowing [16168].

The selloff in US government bonds deepened this week, driving the 30-year Treasury yield to its highest level since 2004 and the 10-year yield back above 5 percent—its highest point since 2007 [16211]. On Friday, the benchmark 10-year yield climbed above 5.1 percent, marking its largest single-day jump in more than a year [16211]. The pain spread globally. In the United Kingdom, 10-year gilt yields rose to 5.34 percent, close to a 19-year high [16211]. By Wednesday, the US selloff had spilled into Asian debt markets, with yields rising across the region as investors turned cautious [16211].

Higher bond yields feed directly into mortgage rates, pushing home loan costs to multi-year highs in several major economies [16211]. Monthly payments are rising, affordability is worsening, and existing homeowners face noticeably higher costs when refinancing or moving [16211]. The shift marks the end of an era. For years, the "There Is No Alternative"—or TINA—logic kept money in stocks because bonds paid almost nothing [16211]. With government bonds now offering real returns, that calculus has flipped [16211].

Wall Street expects the US government to issue about $1 trillion in short-term debt as borrowing costs climb [16168]. European investors are also growing cautious about US Treasury bonds, once considered one of the world's safest investments, amid concerns over US government debt levels and political gridlock in Washington [16168]. Some economists are drawing parallels to the 2008 financial crisis. In 2008, bad loans and weak regulation brought the global banking system to the edge of collapse. Today, the risks look different but no less serious: oil prices are unstable because of conflict, AI is changing industries fast and threatening jobs and profits, and markets remain fragile [16168].

## A Multipolar World Tests Its Unity

As the conflict reshapes energy markets, it is also testing the architecture of global governance. At a summit in New Delhi, leaders of the BRICS nations—Brazil, Russia, India, China, and South Africa, now expanded to 11 members—urged all sides in the Iran war to show "maximum restraint" and return to dialogue [16168]. Indonesian President Prabowo Subianto told the 11-nation bloc to stop depending on outside powers and instead turn its own weaknesses into economic strength. He said BRICS members control critical minerals such as nickel, lithium, and cobalt—raw materials essential for electric car batteries and solar panels—giving them a central role in the global shift to clean energy [16168].

Despite speculation, BRICS is not trying to replace the US dollar. Instead, members aim to protect themselves from its dominance. Some face heavy US sanctions. Others want to reduce reliance on Western financial systems. These different motivations limit how far the group can act together [16168].

The trade landscape is also shifting dramatically. US President Donald Trump warned that he would impose "very severe" tariffs or halt trade with the European Union if the bloc moves forward with a proposal to grant Canada its first "partner member" status [16168]. The threat marks a sharp escalation in the trade war between Washington and its closest allies.

Meanwhile, China's electric vehicle makers are capturing record market share in Europe, with battery electric sales surging 62.7 percent in August and BYD overtaking Tesla in cumulative registrations [16189]. The rise of Chinese manufacturers marks a growing challenge for established European automakers in their home market.

## Domestic Politics and Democratic Backsliding

The converging crises are reshaping domestic politics across the world. In the United States, President Donald Trump has banned CNN, MSNBC and Politico from the White House press area, accusing the outlets of reporting "fake news" [16168]. The move targets three major news organizations that cover the White House daily, and it comes as Trump's approval ratings have reached a record low [16168].

The administration has also deported more than 25,000 people to third countries under secretive agreements with 35 nations, according to an investigation [16168]. An Iranian woman was among those deported. She was flown from the United States in shackles and left in a country in Africa she did not know existed [16168]. A federal appeals court has blocked the policy, with a three-judge panel ruling unanimously against the Department of Homeland Security policy, finding the practice unlawful [16168].

In Berlin, the Left Party won the state election on September 20 with 24.5 percent of the vote, defeating the Christian Democratic Union that currently leads the city government [16168]. The result puts the party's lead candidate, Elif Eralp, in position to become governing mayor—a first for Berlin. Eralp comes from a socialist and trade union family that fled Turkey for Germany. If she takes the city's top office, she would be the first person of Turkish origin to lead Berlin, and the first woman with an immigrant background to do so [16168].

## The Road Ahead

The overlapping crises—energy shocks, war, climate disasters, and tightening credit—are converging to squeeze households and governments alike. The global order built on financial accumulation and profit is generating unsustainable inequality, precarious labor, and debt burdens that stifle equitable development. As BRICS tests whether it can speak with one voice, Europe confronts Russian aggression, and central banks tighten the screws on borrowing, the question of who bears the burden of these cascading crises—and who receives care when systems collapse—is becoming harder to ignore [16168].

The crises are not separate; they are symptoms of a political system in which financial power and corporate influence have quietly displaced the public interest—and in which the bill for that displacement is being handed to those least able to pay it [16168].

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