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The war in the Middle East has had, so far, a much more modest effect on the global economy than feared a year ago, after the Hamas attack on October 7. This could change, however, as the crisis appears set to spread and grow.
As we were unfortunately not at the first armed conflict in the region, we quickly established, last year, by what means the crisis was likely to be felt in other economies. The shock was to come from energy prices, this part of the world accounting for almost 30% of global oil production.
This was not, of course, because Israel and the Palestinian territories are oil producers, any more than their Lebanese neighbor. Ultimately, it was not just because Iran, an ally of Palestinian Hamas and Lebanese Hezbollah, produces around 4% of the world’s oil, since other producing countries could largely compensate for any shortfall, that other nations have learned, over time, to diversify their sources of supply and that several of them have strategic reserves in the event of a problem, the World Bank explained at the time.
This was particularly because if Iran and its production and export capacities were to be directly affected by the conflict, the Iranians could say to themselves that there is no reason why they would be the only ones to pay the price of this war, explains Angelo Katsoras, geopolitical analyst at the National Bank. They could then easily disrupt, or even block, maritime traffic in the Strait of Hormuz, through which almost a third of the world’s oil and a fifth of the liquefied natural gas transported by sea leave the Persian Gulf.
In the event of a “limited” disruption of oil supplies comparable to what was experienced during the civil war in Libya in 2011, an increase in the price of oil to $93-102 could be expected. $ per barrel in the first months followed by a return to $81 in 2024, the World Bank predicted last year. But in the event of a “major disruption” comparable to the 1973 Arab oil embargo, it was warned that the price of black gold could initially rise to $140, and even $157 per barrel. .
Oil shock? What oil shock?
There was nothing encouraging about this prospect. Not just for all those people who have to put gas in their cars every week, but also because despite the halving of the amount of oil needed to produce a dollar of wealth since the 1970s, any increase The price of food, goods and their transport ultimately affects prices. That is to say exactly the opposite of what we want when we already have an inflation problem.
When the World Bank was developing its various possible scenarios in the aftermath of the October 7 attack, the price of a barrel was around $83. It never rose above $87 after that, instead staying around $80, dropping to a low of $66 last month, still being at $68 at the start of last week, then rising again to 74 $ Friday.
Other allies of Iran and Palestinian Hamas, the Houthi rebels have also sought to disrupt the world economy by attacking cargo ships off the coast of Yemen. Helped by a drought which complicated the use of the Panama Canal, they contributed to almost doubling the price of transporting a container, without however preventing international trade from gaining a little momentum.
To be continued…
Why not more consequences on the global economy over the past year? The crisis has not really affected oil production and exports in the Middle East. In fact, the international situation has even rather exerted downward pressure on the prices of black gold, the United States having increased its supply at the same time as China’s economic difficulties reduced demand, observed last week THE New York Times.
For the populations directly concerned, it is obviously a completely different story. Starting with the approximately 150,000 deaths and injuries reported by the United Nations, not to mention the millions of people displaced and traumatized since the start of the conflict.
From a strictly economic point of view, the Palestinians notably witnessed the almost complete collapse of the economy of the Gaza Strip, a decline of 86% during the first half of the year, while that of the West Bank melted a quarter, according to the International Monetary Fund. In Israel, meanwhile, it has only partially recovered from a 20% decline in economic activity seen in the last three months of 2023 alone.
Watching the markets go in recent months, we said to ourselves that we were much less afraid of the sound of bombs in the Middle East than of the possible consequences of the American elections, the painful relaunch of the Chinese economy, the high tension between the American and Chinese giants or even the numerous political, economic, social and even military challenges (with the war in Ukraine) facing Europe, observes Angelo Katsoras. “But the threat of crisis in the Middle East remains present. »
This seemed suddenly remembered in recent days as Iranian missiles began raining down on Israel and US President Joe Biden publicly raised the possibility of the Israeli military directly attacking facilities Iranian oil companies.
“This new escalation is serious and justifies the increase in oil prices,” observed an expert in the Financial Times at the end of last week. But we’ve been through this before. The conflict must extend to the Gulf [Persique] to trigger a price increase that is broad and lasting. We’re not there yet. »