Iran war energy shock structurally entrenches Global South debt crisis

The US-Israeli strikes on Persian Gulf gas infrastructure have created a supply shock requiring up to five years of reconstruction, guaranteeing a sustained energy price premium regardless of ceasefire outcomes. This compounds an already critical sovereign debt situation: the share of low-income countries in debt distress has doubled from 24% in 2013 to 54% in 2024. Rising US interest rates triggered by inflation will increase dollar-denominated debt servicing costs simultaneously across Global South borrowers — whether owed to Beijing, London, or multilateral institutions. The structural parallel to the 1980s debt crisis is analytically significant: that episode reversed decades of development gains and the resolution came too late for many affected nations.