Israel-Iran War Triggers Global Economic Uncertainty
(MENAFN) The 12-day conflict between Israel and Iran has raised fresh alarms over the global economy, with analysts warning of significant impacts on commodity prices and the potential for a new economic crisis.
Risk sentiment across global markets has sharply escalated following missile strikes by Israel on June 13 against key Iranian infrastructure, with Tehran's retaliation sending shockwaves through energy markets worldwide.
The attacks on Iran’s oil facilities have disrupted global oil supplies, and fears of the potential closure of the Strait of Hormuz have pushed oil prices higher.
This vital waterway links the Persian Gulf to the Sea of Oman, enabling the transportation of oil and liquefied natural gas (LNG) from the Middle East to global markets.
Experts predict that the price of Brent crude could surge to $110-130 per barrel if the Strait is shut, though the possibility of triggering a broader regional conflict adds further uncertainty to the forecast.
The closure of the Strait of Hormuz could potentially lead to a 0.8% reduction in global GDP, according to economists, amplifying concerns about a wider economic downturn.
These geopolitical tensions are not just impacting energy prices; they are also disrupting maritime trade. Rising military and political tensions in the region have driven up insurance premiums and freight costs, increasing expenses for international shipping.
The United States, in particular, faces significant economic fallout, given its $37 trillion debt, ongoing inflationary pressures, and trade conflicts with China and other nations.
Washington’s protectionist trade policies, combined with the escalation in the Middle East, have further stoked fears of inflation and economic recession. According to experts, the ongoing conflict could lead to stagnation in the US economy.
A $10 rise in oil prices is forecast to drive up consumer inflation by 0.5%. If Brent crude climbs to $110-130 per barrel, US inflation could spike to 5.5%, forcing the Federal Reserve to raise interest rates and potentially derailing the country’s fragile recovery.
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