Abstract

Geopolitical conflicts can generate substantial inflationary pressures by disrupting energy supplies, commodity markets, international trade, and global supply chains. However, the magnitude and persistence of these pressures depend not only on the initial external shock but also on how it is transmitted through domestic prices, wages, inflation expectations, and policy responses. This paper develops a conceptual framework for analyzing geopolitical inflation as a multistage transmission process and applies it to two contemporary episodes: the Russia–Ukraine war and the 2026 Iran-centered regional conflict. Drawing on the theoretical and empirical literature, the analysis distinguishes between the immediate inflationary effects of geopolitical shocks and the transmission mechanisms through which these effects may persist over time. The Russia–Ukraine war generated particularly strong inflationary pressures through disruptions to European natural gas, oil, food, and fertilizer markets, whereas the 2026 Iran-centered conflict affected inflation more directly through global oil markets, disruptions to shipping through the Strait of Hormuz, and risks to Gulf energy supplies. The comparative analysis, while not involving econometric estimation or establishing causal relationships, indicates that the inflationary effects of both shocks varied substantially across economies, depending on energy dependence, trade exposure, import concentration, domestic market structures, and available policy buffers. The analysis further emphasizes the importance of inflation expectations, wage and price-setting behavior, and monetary-policy credibility in determining whether temporary supply disruptions become embedded in broader inflation dynamics. The study suggests that geopolitical inflation is neither uniform across economies nor necessarily persistent. Rather, its persistence reflects the interaction between the characteristics and duration of the external shock and the institutional and macroeconomic conditions of the affected economy. The paper draws implications for monetary and fiscal policy and identifies priorities for future empirical research, contributing to a more integrated understanding of how geopolitical shocks propagate through domestic economies and shape inflationary dynamics.

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