The Pre-War and Post-War Effect of the 2026 Iran War on Key Economic Indicators in Selected Middle East and Asian Countries

A. A. Asaolu; V. A Dombo; F. A. Adebimpe; L. O. Afolayan; J. E. Ajayi

doi:10.56201/ijssmr.vol.12no8.2026.pg465.480

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The Pre-War and Post-War Effect of the 2026 Iran War on Key Economic Indicators in Selected Middle East and Asian Countries

A. A. Asaolu, V. A Dombo, F. A. Adebimpe,, L. O. Afolayan, J. E. Ajayi

Abstract

The study examines the pre-war and post-war effects of the ongoing 2026 Iran conflict on real gross domestic product growth, inflation rate, exchange rate volatility, trade balance and foreign direct investment net inflows across eight economies. A balanced panel of 72 observations spanning 2018 to 2026 is analyzed using fixed effects and random effects panel regression alongside difference-in-differences estimation. The panel regression results establish that war exposure index is negative and significant at -1.842 (p < 0.01) for real GDP growth, positive and significant at 8.341 (p < 0.01) for inflation rate, positive and significant at 3.214 (p < 0.01) for exchange rate volatility, negative and significant at -2.187 (p < 0.05) for trade balance and negative and significant at -0.912 (p < 0.01) for foreign direct investment net inflows. Economic diversification helped cushion these adverse effects, whereas military spending negatively affected macroeconomic performance. The dollar peg system significantly reduced exchange rate instability. The difference-in-differences results further revealed that directly exposed countries experienced weaker growth, higher inflation, greater currency instability, and declines in trade and foreign investment compared to less-exposed economies. These findings have implications for energy-importing and energy-exporting economies, conflict- affected countries and multilateral institutions in managing exposure to geopolitical shocks.

Keywords

Iran Conflictgeopolitical shockprice shockeconomic diversificationexchange rate stabilitymilitary expenditure

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The Pre-War and Post-War Effect of the 2026 Iran War on Key Economic Indicators in Selected Middle East and Asian Countries

Abstract

Keywords

References

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