The global economy has been greatly affected because of the ongoing Israeli aggression against civilians in the Gaza Strip. Now there is a real risk of the war expanding. With Israel committing massacres and genocide against the Palestinians, regional powers have become involved in this conflict, such as Hezbollah, which is based in Lebanon, in northern occupied Palestine, and the Houthis in Yemen. The latter has caused considerable disruption to navigation in the Red Sea, leading to an increase in the cost of oil.

The Middle East has not witnessed stability in several sectors since Covid-19. This has had dire effects and repercussions on the economies of some countries, and governments are developing strategic plans to recover from the economic crises that are sweeping the region. This is likely to get worse if the Israeli war expands. As a result, the price of crude oil is likely to rise to more than USD100 per barrel compared to about USD86 now.

What a continuation of the Israeli war could mean

Observers confirmed that the continuation of the Israeli war on Gaza would lead to a significant increase in energy prices, stressing that oil markets will remain in a state of anticipation that the war could expand at any time.

Observers pointed out that the cost of petroleum products could increase in line with an increase in the bill for transporting and shipping these products. This happened after the escalation of geopolitical tensions in the Red Sea, due to Houthi attacks on oil tankers and ships. This is a dangerous development that directly affects the price between the cost of buying and selling petroleum derivatives.

Economic and research institutions confirmed that the Israeli aggression in Gaza will exacerbate the enormous human suffering. This war will also have consequences for the Middle East and North Africa (MENA). The economic impact will extend far beyond the combat zone in Gaza and the West Bank.

International research reports, such as the International Development Committee of the UK House of Commons, indicate that rising uncertainty about the course of the conflict is eroding consumer and business confidence, leading to a possible decline in spending and investment. Moreover, the International Momentary Fund (IMF) affirmed that in the absence of a permanent ceasefire, and even if the conflict remains contained, uncertainty could weigh on MENA, and growth could deteriorate if uncertainty starts to negatively affect investment decisions.

In October 2023, the World Bank's latest Commodity Markets Outlook reported that the recent escalation of the conflict in the Middle East, coupled with the turmoil caused by Russia's invasion of Ukraine, could push global commodity markets into a state of uncertainty. The World Bank forecasts that oil prices will average USD90 per barrel. "This latest conflict in the Middle East comes on the heels of the largest commodity market shock since the 1970s, Russia's war on Ukraine. The devastating effects on the global economy are still being felt today. Policymakers will need to be vigilant, and if this conflict escalates, the global economy will face a double energy shock for the first time in decades, not just from the war in Ukraine, but also from the Middle East," said Indermit Gill, World Bank chief economist and senior vice president for development economics.

In recent years, low- and middle-income countries in the MENA region have experienced a series of interconnected energy crises. The war in Ukraine has highlighted the disparities in the region and shown that the situation varies from one Arab country to another.

Oil-exporting countries have made huge profits from oil and gas because of the higher energy prices caused by the conflict. However, countries importing these resources have suffered from high-energy costs, budget constraints, and high-energy prices and these have accelerated the pace of inflation.

Photo: The global economy could suffer as a result of so many wars (Adobe).