War in Israel: a threat or a chance for the global economy?

The war between Israel and Hamas, which began on October 7, 2023, has become one of the bloodiest and most destructive conflicts in the Middle East in decades. According to the UN, more than 2,000 people, mostly Palestinians, have been killed in two weeks of fighting, and some 50,000 people have been displaced from their homes. The war has also caused major disruptions in the energy, transportation and communications sectors, as well as the threat of environmental disaster due to damaged oil and gas pipelines.

The war in Israel has not left the world community and political leaders indifferent. Many countries have called for a ceasefire and the resumption of negotiations to resolve the Israeli-Palestinian conflict. However, so far all attempts at mediation have been unsuccessful, and both sides continue to exchange rocket attacks and accusations of violating international law.

The war in Israel also has serious implications for the global economy, which is already struggling due to the coronavirus pandemic, rising inflation and instability in the financial markets. In this article, we will look at how the war in Israel affects the world economy, what risks and opportunities it poses for different countries and regions, and what measures need to be taken to mitigate its negative impact.

Impact of the war in Israel on the oil and gas market

One of the main factors that determine the impact of the war in Israel on the world economy is its effect on the oil and gas market. The Middle East is the largest producer and exporter of oil and gas in the world, as well as a key transit region for these types of energy. Any disruption in the supply or transportation of oil and gas from this region could lead to a spike in the prices of these commodities, as well as energy shortages in other parts of the world.

The war in Israel has already affected the oil and gas market, although not to the same extent as previous conflicts in the Middle East. According to the International Energy Agency (IEA), the war in Israel has reduced oil production in the region by 300,000 barrels per day, about 0.3% of global demand. However, oil prices have not changed much as the global market remains oversupplied due to production recovery in Iran, Libya and the US, as well as lower oil demand in China and Europe due to the coronavirus. According to the IEA, the average price of Brent Crude for October 2023 was $89 a barrel, $2 higher than in September.

The war in Israel has also affected the gas market, especially in Europe, which is a major consumer and importer of gas from the Middle East. Israel became a net exporter of gas in 2013 after the discovery of two major fields - Leviathan and Tamar - which supply not only the domestic market but also exports, mainly to Egypt, Jordan and Europe. However, the war in the Middle East has already led to the suspension of work on the Tamar field due to the threat of rocket attacks by Hamas. The fate of the Leviathan field has not yet been determined, but it could also become a target for missiles. This could lead to a reduction in gas supplies from Israel to the European market, which is already experiencing gas shortages due to low reserves, high demand and political problems with Russia. According to the IEA, gas prices in Europe hit a record high in October 2023 at $45 per million British thermal units (MMBtu), 150% higher than a year ago.

The impact of the war in Israel on financial markets and trade

The war in Israel also has a negative impact on financial markets and trade. The war raises the level of geopolitical uncertainty and risk, leading to lower risk appetite among investors and traders. This could lead to capital flight from emerging and frontier markets, which are more vulnerable to shocks, as well as ...strengthening the dollar and gold as safe-haven assets. The dollar index, which reflects its exchange rate against a basket of six major currencies, has gained 1.5 percent since the start of the war to 96.7 points, according to data compiled by Bloomberg. The price of gold also rose 2.3% to $1,880 a troy ounce.

The war in Israel is also affecting global trade, especially trade with the Middle East. The war threatens the security of sea and air routes that carry much of the cargo and passenger traffic between Europe, Asia and Africa. In particular, war could affect the Suez Canal, which is one of the world's most important maritime arteries, carrying about 10% of the world's trade. Any attacks or blockades of the canal could cause delays and increase the cost of shipping goods, as well as increase the price of goods. According to the International Chamber of Commerce (ICC), the war in Israel has already led to a 10-15% increase in insurance rates for ships navigating the Suez Canal.

The impact of the war in Israel on regional and global security

The war in Israel not only damages the world economy, but also undermines regional and global security. The war could provoke an escalation of violence and conflict in other parts of the Middle East, as well as increase terrorism and radicalism. War could also lead to a deterioration in relations between major powers that have different interests and positions on the Israeli-Palestinian conflict.

The war in Israel has already provoked reactions from other countries and powers in the Middle East. Some of them have expressed support for Hamas and Palestine, while others have expressed support for Israel. For example, Iran, which is a major ally and sponsor of Hamas, has accused Israel of genocide of Palestinians and called for mobilization of all Muslims against the "Zionist regime." Turkey, which also supports Hamas, condemned "Israeli terrorism" and pledged humanitarian aid to Palestine. Saudi Arabia, which is the leader of the Arab world, called for a ceasefire and a peaceful solution to the conflict through a two-state solution. Egypt, which is a neighbor of Israel and Palestine, is trying to mediate between them and organize a truce.

The war in Israel also affects the interests and relations of major powers such as the United States, Russia, China and the European Union. The U.S., which is Israel's main ally and partner, has expressed support for Israel's right to self-defense, but has also called for restraint and a reduction in tensions. Russia, which has influence in the Middle East and supports a two-state solution, called for a cease-fire and the resumption of negotiations. China, which is a permanent member of the U.N. Security Council and is seeking to expand its presence in the Middle East, condemned Israel's "unprecedented violence" and offered its help in mediation. The European Union, which is Palestine's largest donor and a supporter of a two-state solution, also advocated a ceasefire and a peaceful resolution to the conflict.

Measures to mitigate the impact of the war in Israel on the global economy

The war in Israel poses a serious threat to the world economy, which needs stability and cooperation to cope with the impact of the coronavirus pandemic. To mitigate the impact of the war in Israel on the world economy, the following measures should be taken:

•   Cease fire and violence. This is the most important and urgent step that must be taken to prevent further casualties, destruction and escalation of the conflict. For this, mediation efforts by the UN, the US, Russia, Egypt and other stakeholders need to be stepped up. Humanitarian access to and assistance for the affected population must also be ensured.
•   Resume negotiations to resolve the Israeli-Palestinian conflict. This is a long-term and complex process that requires political will and compromise from both sides. However, it is the only way to achieve a just and sustainable peace in the Middle East. This requires supporting a two-state solution based on the 1967 borders...with possible land swaps, recognition of Jerusalem as the capital of both states, and a solution to the refugee problem. This also requires taking into account the interests and positions of other countries and forces in the Middle East, as well as major powers.
•   Stabilize and support the world economy. This requires coordinated action from international organizations such as the IEA, ICC, IMF and World Bank, as well as national governments and central banks. It requires ensuring reliable and secure supplies and transportation of oil and gas from the Middle East, as well as reducing dependence on these types of energy sources and developing alternative energy sources. It is also necessary to maintain the liquidity and resilience of financial markets and to promote the recovery of trade and investment. In addition, aid should be provided to developing and frontline countries that have been most affected by the war in Israel as well as the coronavirus pandemic.

Conclusion

The war in Israel is one of the most serious challenges to the world economy and security at present. War not only causes loss of life and destruction in the Middle East, but also creates risks and instability for other regions and countries. The war in Israel affects the oil and gas market, financial markets and trade, as well as regional and global security. Mitigating the impact of the war in Israel on the global economy requires a cessation of fire and violence, the resumption of negotiations to resolve the Israeli-Palestinian conflict, and the stabilization and support of the global economy. This requires cooperation and dialogue among all stakeholders, as well as responsibility and humanity on the part of all parties to the conflict.