On Friday, Israel launched an unprecedented aerial assault on Iran amid escalating tensions, killing top-ranking military officials and nuclear scientists. Despite enduring heavy losses, Iran retaliated with missile strikes on Tel-Aviv, sparking much chaos.
Over the next several days, both countries would trade aerial assaults, leading to significant casualties on both sides. International pressure to reduce hostilities has increased to prevent a full-blown war.
A full-fledged Iran-Israel war would do neither side any favours, with the possibility of unprecedented destruction. What’s even worse is that it could have wider implications. The fragile global economy would take a major hit from a sustained Iran-Israel war.
The Iran-Israel War Could Create a Global Energy and Fuel Crisis
Despite no signs of production losses, oil prices rose due to the regional and global uncertainty surrounding the brewing conflict between Iran and Israel.
These are just the immediate aftershocks of the conflict; a long-lasting, full-blown war could have serious ramifications for global fuel supplies and energy reserves. The world may see a steep and sustained rise in energy prices.
Iran is the third-largest producer in the Organisation of the Petroleum Exporting Countries (OPEC). Prolonged conflict with Israel could disrupt oil production, contributing to rising costs.
More importantly, Iran borders the Strait of Hormuz, a narrow passage that connects the Persian Gulf and the Indian Ocean. This waterway is a chokepoint of nearly 20% of global liquified-natural-gas (LNG) supply.
Although Iran has refrained from blocking the passageway in the past, it could potentially impede shipping in the face of an escalating conflict with Israel. This move will drive up oil prices significantly worldwide.
Closing the Strait of Hormuz could surge oil prices to 120-130 dollars per barrel. Simply put, when oil costs rise, everything becomes more expensive. Transportation costs will increase, adding to the costs of consumer goods and services.
The World is Still Reeling from COVID-19 and the Ukraine War
The fragile global economy was badly exposed in the wake of the COVID-19 pandemic, which rattled the entire planet. In addition, the Russia-Ukraine war has added to the economic misery.
Israel and Iran find themselves in a productive geopolitical region. Their war has the potential to become a massive regional conflict. The worst-case scenario would see significant rises in oil prices, energy production, transportation costs, and consumer goods.
The global economy has already endured heavy losses in recent years. A massive regional conflict would impede its recovery and add to the economic damages. In simple word: No, the world is not ready for an Iran-Israel War.
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