Just over a week ago, an Islamic Resistance Movement called Hamas attacked Israelis in Gaza. Since then, the death toll has risen into the thousands, mostly civilians, with more being held hostage. As the conflict grows, concerns of increased worldwide involvement of other countries loom large. Militant groups from Lebanon and Syria may support Hamas in their fight, and sharper escalation could bring Iran into the conflict, forcing supporters of Israel into the war. While possible economic impacts take a back seat compared to the actual conflict, it is important to consider what may happen due to the war.
In 1973, another conflict in the Middle East, the Arab-Israeli war, led to an oil embargo that lasted for years. Coming off the Russian invasion of Ukraine, the world economy may be unable to afford another major conflict in an oil-rich area. According to Bloomberg Economics, they estimate that a significant escalation in Israel could see oil prices rise to $150 per barrel and global growth drop to 1.7%. To put these numbers into perspective, a recession like this would result in $1 trillion off the world output. It is also essential to measure the possible changes to inflation that can come from changes in the oil supply.
To accurately forecast the world's economic state during and after the conflict in Israel, economists have to adapt their predictions based on the severity of the war. If the conflict stays within Gaza, there will be little economic impact on GDP and inflation, and oil prices will rise by $4 per barrel. Iran already supports groups there if the war breaks out and spreads to Lebanon and Syria. This expansion will double the oil price per barrel compared to a confined war and the previous inflation impact to +0.2 ppts. Finally, the worst-case scenario is a direct conflict between Israel and Iran. This regional escalation could result in a global recession as oil prices and inflation would rise tremendously.
To conclude, the war in Israel can become a global conflict, but it does not need to move to affect the world economically. Due to the Middle East's oil production, no matter the participants or the region in which the conflict takes place, the world will be impacted by this war.
SOURCE : https://www.bloomberg.com/news/features/2023-10-12/israel-hamas-war-impact-could-tip-global-economy-into-recession#xj4y7vzkg
Thomas, seeing these war impacts in terms of economic numbers is crazy! It just reminds me that wars affect EVERYTHING from prices, trade, to family life, peoples safety, and more. Your post tells us that we do not just need to end the war because people are dying but it is going to cause a recession and for inflation to rise also. These all are bad and we need to try to get ahold on things before they get out of hand. I truly just wish that this would end and we could have peace, but not everyone thinks the same sadly. It will be interesting to see how this war does affect oil prices and all the goes along with that throughout the next couple weeks/months.
ReplyDeleteWar is a horrible thing. Obviously innocent people dying and places being completely destroyed is awful and unethical. The lasting effects both socially and economically are tough to swallow and both of these economies will have a strenuous recovery period in order to hopefully make it back to some sort of "normal" even though I do not believe these economies will be able to fully recover anytime soon.
ReplyDeleteThere is a multifaceted impact of wars, not just on human lives but on global economies as well. Such conflicts are complex and interconnected, which highlights the importance of seeking peaceful resolutions. Hopefully, the violence in the affected regions will soon end and will return to a more stable situation, economically and socially. We will certainly see how this war affects oil prices and the broader economic landscape in the coming months.
ReplyDeleteLet us hope that this terrible war does not spread to any further countries. If it were to catch fire fire and expand who knows how catastrophic it could for the economy and of course for human lives. Containing this war has to priority number one for the world. It is not worth it to spread and hopefully a peaceful resolution that is beneficial to both side can soon be found. However, this does not seem like a solution that will happen any time soon.
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