A prolonged Palestine-Israel war’s effect on global economy, explained

A prolonged Palestine-Israel war’s effect on global economy, explained

The global economic impact of the ongoing conflict between Palestine and Israel has been at the forefront of the international community’s concern.

As tensions escalate between the two parties, experts express pressing concerns regarding the potential economic impact of this conflict, particularly on the Middle East and North Africa region.

The world has witnessed a surge in oil prices and fluctuation in currency values, raising concerns about fuel supplies from the region in light of reduced production by major oil producers like Saudi Arabia and Russia, according to AFP.

AFP also reported some concerns about how the conflict between the two nations could affect inflation, especially since energy costs play a major role in driving up prices, putting additional pressure on central banks to manage interest rates and prevent economic stagnation.

Mehdi Fakir, an expert in the Economy, expressed to MoroccoLatestNews his concerns about the potential economic impacts of these escalations on the world in general and Morocco in particular.

He vented that whenever there is a conflict, this affects the Middle East region. This, in turn, leads to a surge in oil prices globally. Thus, as uncertainties increase, other countries may be affected by the current situation.

“Unfortunately, we are not in the logic of stabilization. The stabilization of the Middle East is wishful thinking. So, if the situation remains unchanged, the climate of uncertainty is likely to have an impact on the global markets, particularly in the Middle East and North Africa region, including Morocco,” explained Fakir.

He added as a reminder, “Whenever conflicts arise in the Gulf region or the Middle East, Morocco is directly affected, even though it may be geographically distant. As for the international market, the development of uncertainties causes market participants to become cautious.”

The expert told MoroccoLatestNews that the potential escalation of the conflict extends beyond Gaza. If the conflict continues and spreads to neighboring countries, such as Lebanon or Iran, the consequences could be severe, and the international markets would likely react accordingly.

“I think we are on the brink of a crisis. The United States financial support for the war and Israel’s aggressive stance, starting with Gaza and potentially extending to Lebanon, Syria, and even Iran, raises alarming concerns,” emphasizing that the situation so far is unclear. That’s why, he underscored, “we don’t know. The developments are expected to have a profound impact on international markets, particularly in the oil market.”

What is sure for the moment is that the ongoing instability in the region is expected to have an impact on the economy and international markets. However, since this war is restricted to Gaza only and not extended to neighboring countries such as Lebanon or Iran, the outcomes and consequences remain uncertain.

“It all hinges on the intentions and actions of Israel. At present, there is a lack of clarity, which has led to caution in the markets,” Fakir emphasized.

The economics expert warned that if there is an increase in oil prices, there will be a surge in inflation systematically. As a result, the interest rate will rise as well.

He emphasized that for the moment there is much uncertainty, so better if we can wait and see.

“If Iran becomes involved tomorrow, the situation will worsen. And if Saudi Arabia joins in, it will exacerbate the situation further. Moreover, if the Suez Canal and Egypt are affected, things will take a turn for the worse. If Israel decides to target oil-producing countries like Iran, it will undoubtedly lead to problems,” explained Fakir.

So, if the countries responsible for oil production become involved in this conflict, a significant increase in oil prices is expected, according to the economics expert.

Fakir underscored that one aspect that should be of concern is the price of oil in Morocco, where inflation is already a persistent issue. “It is highly unlikely that oil prices will decrease to the range of 7 or 8 MAD as before.”

The expert said one more time that what will increase or unfold in the future remains uncertain and unpredictable.

The escalations in tension between Israel and Palestine have been raising concerns since the first day. The surge in oil prices, increased market uncertainty, and inflation are among the major risks.

Even though Israel and Palestine may not be oil-producing countries, their conflict is occurring in the Middle East, a region known for its significant oil production. The area is responsible for nearly a third of the world’s oil supply.

Bryan Martin and Daniel Heinz from ANZ Group said, “The most important concern for the markets is whether the conflict will remain contained or expand to include other regions, specifically Saudi Arabia. They further noted, “Initially, at least, the markets are assuming that the situation will remain limited in scope, duration, and its impact on oil prices. However, larger fluctuations can be expected,” according to AFP.

What will unfold in the future depends closely on the parties that are likely to be involved in this conflict, especially since the Israeli Prime Minister, Benyamin Netanyahu, promised his country’s response to Hamas “will potentially change the Middle East”. He insisted that “Israel will win this war and when Israel wins the entire civilized World win.”

The surprise attack and Israel’s declaration of war in response to it have resulted so far in over a thousand casualties. There are pressing concerns about the potential involvement of the United States and Iran in this conflict if it further escalates.


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