The ongoing feud between Israel and HAMAS, which erupted last week, poses a threat to the world’s economy according to Bloomberg. There’s fear that it could lead to a global recession if more countries get involved amid Israel’s powerful military resistance.
A significant concern lies in regional powers like Lebanon, Syria, and Iran getting drawn into the dispute. Should this happen, it could push oil prices to a skyrocketing $150 per barrel and cause a 1.7% decrease in the global GDP, signifying a recession. This downturn could potentially slash global production by around $1 trillion.
However, overshadowing this economic concern is the devastating loss of innocent lives on both sides. The chaos in Gaza geographical area is heightening the likeliness of military escalation. We must not forget that this region plays a critical role as a major energy supplier and is a key maritime route. The Arab-Israeli war of 1973 stands as a testament – it led to an oil embargo and stagflation that lasted for many years in industrialized countries.
The world’s economy today stands vulnerable due to inflation and the conflict in Ukraine. A war in a pivotal oil-producing region like the Middle East could stoke inflation anew, trigger unrest in the Arab world, and even impact the forthcoming 2022 Presidential elections in the US where fuel prices could be a determining factor.
Regardless, potential ramifications will heavily depend on how the conflict unfolds in the following weeks or months. There are three possible scenarios:
1. Military operations are confined to Israel and the Gaza region.
2. The conflict spills over to neighboring countries like Lebanon, Syria, and possibly Iran.
3. The situation escalates into an outright military clash between two regional nations.
In all these possible scenarios, a common link is the potential for higher oil prices, increased inflation, and slower growth. The more widespread the conflict becomes, the greater its impact will be.