Title: Escalation of Israel-Hamas Conflict Poses Significant Threat to Global Economy, Warn Economists
In a grim warning to the international community, economists have emphasized that any further escalation of the ongoing Israel-Hamas war could have far-reaching consequences on the global economy. The conflict, currently characterized by heavy military exchanges, has the potential to drive up energy prices and disrupt crucial trade routes, posing risks to both global trade and energy infrastructure.
The extent to which the conflict impacts oil prices and the global economy largely hinges on how contained it remains within the region. However, concerns are mounting that the conflict could lead to higher global inflation, softer economic growth, and even recessionary conditions.
Following Hamas’ attack on Israel, oil prices saw a sudden surge. In the worst-case scenario of a regional escalation, prices could skyrocket, possibly surpassing the $100 per barrel mark. Such a development would undoubtedly have severe implications for numerous industries around the world, further exacerbating the economic challenges posed by the ongoing pandemic.
The Middle East, where the conflict is erupting, is home to crucial shipping routes such as the Suez Canal, Red Sea, Persian Gulf, and the Strait of Hormuz. Any attack on these vital routes would create significant disruptions to the supply chains of energy and other goods, leading to widespread economic instability on a global scale.
Moreover, emerging market economies, particularly those heavily reliant on energy imports and where energy contributes significantly to the Consumer Price Index (CPI) basket, are particularly vulnerable to sustained high energy prices. This vulnerability may result in higher inflation rates, threatening the economic stability of these nations.
Additionally, countries that have not yet effectively anchored inflation expectations could experience partial repeats of the inflation spikes witnessed during past conflicts. This could further hamper economic growth and stability, adding to the already daunting challenges imposed by the pandemic.
The scale of devastation in Gaza, the epicenter of the conflict, is difficult to assess. However, economic disruptions and widespread protests have already emerged in the region. Neighboring powers, such as Egypt and the Gulf states, may be compelled to provide substantial financial assistance to stabilize the situation and prevent further unrest.
As the Israel-Hamas conflict continues to escalate, economists urge global leaders to recognize the significant risks it poses to the global economy. Close attention and proactive measures are needed to mitigate the potential damage to international trade, energy infrastructure, and economic stability worldwide.
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