The war between the US, Israel and Iran will continue to weigh on Latin American and Caribbean economies for the rest of 2026, even if last month's fragile ceasefire holds, the UN's regional economic body has warned, as renewed hostilities in the Gulf pushed oil prices higher again this week.

In a special report published on July 10, the Economic Commission for Latin America and the Caribbean (ECLAC) identified six channels through which the fighting — which began with the US-Israeli attacks on Iran on February 28 — and the de facto closure of the Strait of Hormuz are being transmitted to economies across the region, warning that some effects would take months to fully materialise.

José Manuel Salazar-Xirinachs, ECLAC's executive secretary, said the conflict "once again highlights the magnitude of the interdependence of the global economy and the speed with which disruptions and shocks are transmitted between countries and regions." He added that the impact of the various transmission channels would depend on each country's productive structure and its trade and financial ties with the rest of the world.

The report lands amid renewed uncertainty over the durability of a ceasefire reached on June 17, when the US and Iranian presidents signed a memorandum of understanding to end military strikes, lift the naval blockade of Iranian ports and reopen the Strait of Hormuz to commercial shipping, alongside a 60-day window to negotiate a permanent settlement. Hostilities flared again on July 6, and two days later, at a NATO summit in Ankara, US President Donald Trump cast doubt on whether the truce still held.

Brent crude climbed about 5% to roughly $80 a barrel on July 13, after the US carried out its fourth round of strikes on Iran in a week in retaliation for an Iranian attack on a Cyprus-flagged container ship. Iran said the Strait of Hormuz would remain closed "until further notice," a claim the US Central Command rejected, while both sides reported fresh strikes on military and commercial targets across the Gulf.

ECLAC said traffic through the vital waterway, which carries roughly one-fifth of the world's oil consumption and one-fifth of global LNG trade, remained below normal levels at the end of June because of security risks, logistical disruptions and elevated marine insurance premiums, adding that a full recovery would take time even if diplomacy prevails. Based on prices observed through June and a Brent forecast of $75-80 a barrel for the rest of the year, the commission expects the 2026 average price to be 20 to 25% above the $69 a barrel recorded in 2025.

Trade and fiscal divide

Two of the six channels identified by ECLAC, trade and fiscal balances, could benefit net energy exporters while harming the majority of countries that import hydrocarbons. Under its base scenario of oil prices 25 % higher than in 2025, ECLAC calculates the net effect on the region's trade balance is marginally positive, adding 0.05 percentage points of GDP for Latin America and the Caribbean as a whole and 0.13 points for South America. But the impact turns negative for non-hydrocarbon-exporting Caribbean countries, at −0.5 percentage points, and for the group made up of Central America, Haiti and the Dominican Republic, at −0.9 points.

Analysts have previously noted that the gains from higher prices are unevenly spread even among the region's net exporters. In April, Fitch Ratings said the shock was "only really great news" for Argentina, since higher export revenue helps address a pre-existing need to rebuild foreign reserves, a problem Brazil and Colombia had largely resolved beforehand. Mexico, by contrast, sits awkwardly outside the windfall: with crude output in steady decline and higher revenues at state producer Pemex largely offset by the cost of subsidising domestic fuel prices, Fitch assessed the net fiscal impact there as broadly neutral.

On the fiscal channel, ECLAC noted that some governments have moved to shield households by cutting fuel taxes or through other subsidy mechanisms. Bolivia, which scrapped its fuel subsidies in December 2025, has already reintroduced them in response to the shock. Net energy exporters can partly offset the cost of such measures with the extra revenue generated by pricier energy exports, ECLAC said, but net importers face a straightforward deterioration in their public finances, since the additional spending is not matched by higher income.

Inflation, growth and financing costs

The remaining four channels — inflation, a slowdown in global activity, financing conditions and monetary policy — are negative for exporters and importers alike, according to the commission. Higher fuel costs erode household purchasing power both directly and through pricier transport and distribution, ECLAC said, while a related rise in fertiliser costs, given that supply is concentrated in the Persian Gulf, adds to food price pressures and heightens the risk of food insecurity across the region.

Slowing global growth is expected to dampen demand for the region's exports, ECLAC said, while persistent inflation in advanced economies is likely to keep interest rates higher for longer, raising the cost of external financing for Latin American borrowers. Heightened geopolitical uncertainty has also boosted demand for perceived safe-haven assets, strengthening the dollar and pressuring regional currencies, the commission said. In several countries that had been easing monetary policy, ECLAC expects rate cuts to continue but at a slower pace, with knock-on effects for economic activity.

ECLAC, which in April cut its 2026 regional growth forecast to 2.2% from 2.3% and projected inflation of 3%, concluded that Latin America and the Caribbean was relatively better placed than other regions to withstand the shock, given its limited direct trade exposure to the Gulf and the presence of several large hydrocarbon exporters among its economies. But it cautioned that this aggregate picture masked wide disparities, with the majority of the region's countries being net importers of hydrocarbons and thus exposed to negative effects through every transmission channel it identified.