Middle East crisis, human tragedy and economic uncertainty – Opinion – SAPO.pt

The Middle East conflict is a global human tragedy that has caused increasing loss of life and enormous suffering. This devastation has not only caused incalculable human losses, but also had a profound impact on the world economy.

Even before the outbreak of the Hamas-Israel conflict, the global economy was already facing an environment of great unpredictability and tension. This situation is characterized by a high degree of instability, which is reflected in market fluctuations and economic uncertainty. The military crisis in Ukraine and the voluntary cuts in oil production imposed by the Organization of the Petroleum Exporting Countries and its allies are key factors in inflationary instability.

The economic situation deteriorates further when the conflict between Hamas and Israel breaks out in October 2023. At the time, the financial news agency Bloomberg outlined three possible scenarios. If the conflict remains confined to the Palestinian territories, the economic impact will be relatively small. However, Bloomberg also pointed out that Iran’s recognized support for Islamist groups opposed to Israel could lead to Iran’s involvement in the conflict, which could trigger a serious escalation of the conflict. This scenario could lead to a reduction in global oil supply and a possible increase in the price of a barrel of oil by $3 to $4.

The economic shock would be even more severe if the conflict expanded to Lebanon and Syria, where Iran also has significant influence through groups such as Hezbollah. In that case, Bloomberg estimates that the price of a barrel of oil would increase by $8.

The worst-case scenario, a direct confrontation between Iran and Israel, could trigger a global recession. Nuclear threats, strategic relations between Iran and Russia, and the possibility of the Strait of Hormuz being closed to navigation are all worrisome factors that could destabilize the entire Middle East in unpredictable ways, with potentially catastrophic consequences for the global economy. In this scenario, Bloomberg predicts that the price of a barrel of oil would rise by $64. World GDP would lose the equivalent of one-hundredth of its value.

Whatever the specifics, instability in the Middle East is a significant factor in economic and financial uncertainty. In such cases, market volatility tends to increase as the crisis progresses.