The coronavirus disease (COVID-19) pandemic that broke out in 2020 and the conflict between the Russian Federation and Ukraine that erupted in 2022 have demonstrated how the effects of initially localized events can quickly propagate and impact production, supply chains, prices, financial conditions and growth prospects in today’s highly interdependent world.

The recent hostilities involving the United States and Israel, on one side, and the Islamic Republic of Iran, on the other, that began on 28 February 2026 provide yet another example of just how interdependent the world economy is and how swiftly disruptions and shocks spread across countries and regions. There are many different channels of transmission: trade, logistics and global value chains, prices and inflation, fiscal accounts, monetary and financial conditions, and global economic growth dynamics. Shocks do not flow through these channels at a uniform pace, however. Their impact depends on the international position of each economy, its production structure and its trade and financial links with the rest of the world.

This report starts out by providing an analysis of what impacts the recent hostilities have had at the global level and will then go on to explore their specific implications for Latin America and the Caribbean.