By: Staff Writer
July 17, 2026
The Economic Commission for Latin America and the Caribbean (ECLAC) in a new special report said that war in Iran is still sending multiple channels of shocks throughout the Latin American and Caribbean (LAC) region.
“The hostilities between the United States and Israel, on the one hand, and the Islamic Republic of Iran, on the other, reveal once again the magnitude of the global economy’s interdependence and the swiftness with which disruptions and shocks are transmitted across countries and regions. There are multiple transmission channels. However, these channels do not operate uniformly; their impact depends on each economy’s form of international integration, its production structure, and its trade and financial ties with the rest of the world,” stated ECLAC’s Executive Secretary, José Manuel Salazar-Xirinachs.
ECLAC also warns that even if recent diplomatic advances hold, that does not mean there will be an immediate normalization of markets, nor does it invalidate the direction and types of impacts identified in the report. The normalization of production activity in Persian Gulf countries and of trade flows through the Strait of Hormuz will take time: as of late June, traffic through the strait remained below its usual levels, in a context in which security risks persist along with logistical disruptions and high maritime insurance premiums for the ships that are moving through the area.
The document adds that regardless of how prices for energy goods evolve in the coming months, the average for 2026 will be higher than in 2025: taking the prices effectively observed through June and assuming a Brent benchmark price of US$ 75-80 per barrel for the rest of the year, the annual average in 2026 is forecast to be 20% to 25 percent higher than the US$ 69 per barrel registered in 2025. In addition, while some of the effects of higher energy prices already set in between March and June, others – which tend to lag – will continue to unfold throughout 2026.
ECLAC identified six channels for the transmission of oil price impacts to Latin America and the Caribbean: two that could be positive – although not necessarily – for net exporters of energy but that are adverse for countries that are not net energy exporters (the trade and fiscal channels), and four that are adverse for all of the region’s countries.
The report said: “The first transmission channel is the trade channel. In addition to the indirect effects stemming from disruptions in supply chains and the increased logistical costs of international trade, the conflict has a direct impact on Latin America and the Caribbean’s trade balance through the variation in the prices of energy and other exported or imported goods. The increase in energy prices improves the trade balance of net exporters of energy and deteriorates that of net importers, which accounts for the vast majority of the region’s countries in numerical terms. In a scenario of oil prices that are 25% higher than in 2025 – which is the report’s base scenario – the trade balance impact is slightly positive for Latin America and the Caribbean as a whole (+0.05 percentage points of GDP in 2026) and for South America (+0.13 percentage points), but it is negative for non-hydrocarbons-exporting Caribbean countries and for the group made up of Central America, Haiti and the Dominican Republic (−0.5 and −0.9 percentage points, respectively).
“The second transmission channel is the fiscal one. Some governments have opted to absorb part of the shock of energy prices by reducing fuel taxes or using other mechanisms to protect the purchasing power of households. In the countries that are net energy exporters, the increased fiscal revenue resulting from these goods’ higher prices serves to partially cushion that fiscal cost, but for net importers, that increased expenditure is not offset by higher revenue and leads to further deterioration of fiscal accounts.
“There are four more channels, however, that have negative impacts for net energy exporters and net energy importers alike: the price channel (inflation), the cooling of global economic activity, the financial channel and that of monetary policy.
“In addition, there is a channel linked to cooling global economic activity: the conflict has affected global growth prospects, and the more they deteriorate, the lower the region’s external demand will be.
“A fifth channel is the financial one. Inflationary pressures in advanced economies lead their central banks to keep interest rates high for longer than expected, making external financing more expensive for the region.
“Finally, the sixth transmission channel is that of monetary policy. As a result of inflationary pressures, in several countries of the region that were reducing their policy interest rates, it is expected that those cuts will continue but at a more gradual pace, which could have an impact on economic activity.”