RIYADH: In an alarming report released on October 30, the World Bank says that the war between Israel and Hamas in Gaza has caused oil prices to soar by up to $150 per barrel, costing millions around the world. It warned that it could cause economic “shocks” including people going hungry. This is due to soaring food prices.
Just as the global economy emerges from the turmoil of the pandemic and the shockwaves of the Ukraine war, economists and risk analysts are wondering how the conflict between Israel and Hamas could escalate and spread to Lebanon, Syria, Iraq, and even beyond. All eyes are on whether this will develop into a widespread regional war. Iran could impact global economic recovery and commodity prices in rich and poor countries alike.
In its latest Commodity Market Outlook, the World Bank stresses that the global economy is in a much better position to “cope with” large oil price shocks than it was in the 1970s, but that “recent Escalating price shocks could push global commodity markets into unchartered waters if the Middle East conflict, coupled with the disruption caused by Russia's invasion of Ukraine, occurs.
In 1973, members of the Organization of the Arab Petroleum Exporting Countries, led by King Faisal of Saudi Arabia, declared an oil embargo on countries that had supported Israel during the Yom Kippur War. At the time, under the Nixon administration, the U.S. economy had become increasingly dependent on foreign oil, and the embargo placed a severe burden on it.
“At the moment, the situation is fluid,” Dr. Nasser Saidi, former Lebanese Minister of Economy and Trade and founder of the economic and business advisory consultancy firm Nasser Saidi & Associates, told Arab News, adding: Ta. Hamas' war also depends on the length and depth of the conflict, and whether it spills over wider regions, involves other parties, has international ramifications, and thus impacts global supply chains. It will depend on it. ”
In his presentation “The Middle East in a Divided Multipolar World'' at the 19th Korea Middle East Cooperation Forum held in Doha from November 5th to 8th this year, Saidi said, “Global growth momentum will increase this year. Already slowing significantly, war has the potential to slow growth further and push public debt, already at record levels, into crisis.
The bank's report said the conflict has so far had limited impact on global commodity markets. Overall oil prices have increased by about 6% since the conflict began. Prices for agricultural products, most metals, and other goods have changed little.
“The global economic impact of the war between Israel and Hamas remains relatively modest,” Robert Mogielnicki, a senior fellow at the Arab and Gulf States Institute in Washington, told Arab News.
The impact of an Israel-Hamas war will depend on the length and depth of the conflict, as well as the likelihood that the conflict will spill over into a wider region and involve other parties, leading to international ramifications and thus affecting global supply chains. It also depends on whether you give it or not. .
Dr. Nasser Saidi, former Lebanese Minister of Economy and Trade and founder of Nasser Saidi & Associates
“Unless we see this conflict ignite the region, it's unlikely there will be a major shock to global markets,” he added. “Of course, this war raises the geopolitical stakes within the region, but in many cases the impact of geopolitical developments on markets tends to be limited and short-lived.”
But some analysts take a different view, warning that continued fighting between Israel and Hamas could seriously threaten the already fragile global economic outlook.
The war in Gaza is now in its sixth week, with around 1.5 million Palestinians displaced, 21 hospitals disabled and dozens more severely damaged, and more than 11,000 people displaced. It is reported that thousands of people were killed and tens of thousands more were injured. to the Ministry of Health in the Hamas-run Gaza Strip.
“We are meeting at a very dangerous time for our part of the world,” Saidi said in a presentation in Doha. “The timing of this conference is very good on a personal level and I think it reflects a lot of us. As a professional, as a minister, as a civil servant, as an academic, I have known nothing but war all my life. My message is that this has to end, and that perhaps what is happening today in Gaza and Palestine more generally may be a moment of change. . We don't know yet. We are still living in the fog battle.”
As Saidi highlighted, the Middle East is home to 60 percent of the world's refugees, the highest number in the world.
He added that Palestinian refugees would not only remain in neighboring countries, but would also be forced to move to other regions, including Europe.
“The impact of a war on oil and gas prices could be significant,” Saidi said, adding that if oil prices soar to a record $150 a barrel, as the World Bank warns, ” “This will have an impact on already strong global economic growth.” “The greater the impact of inflation on commodity prices, the lower economic growth and the greater the debt crisis in many countries, because there are also periods of high interest rates.”
“Destruction and violence breeds violence,” Saidi added in his presentation. “There is no military solution for Gaza.”
The most vulnerable countries in the Middle East include Lebanon, Egypt, Jordan, and Iran. These countries are already facing slowing growth, current account and fiscal deficits, and declining foreign exchange reserves. Saidi said the tourism, hospitality, construction and real estate industries will be most affected in these countries, as well as reduced capital outflows and foreign direct investment inflows.
“Neighboring Middle Eastern countries that have significant economic challenges within themselves, such as Egypt and Lebanon, are particularly vulnerable here,” Mogielnicki said. “The spillover of violence and refugees will have an immediate impact on neighboring countries that do not necessarily have the absorbing capacity.”
Obviously we are heavily dependent on oil.
“An escalation in violence and large-scale attacks in Gulf oil and gas producing countries will have a consequent impact on energy markets,” Mogielnicki said. “So far, key actors in the Gulf region have demonstrated a strong desire to prevent this war from escalating into a broader regional conflict.”
On November 11, Saudi Arabia convened an emergency Arab-Islamic summit to address concerns about the humanitarian crisis in Gaza. All leaders agreed on the need for a ceasefire. The joint summit ended with a call for an Israeli arms embargo.
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The World Bank says the global economy is in a much better position than it was in the 1970s to cope with large oil price shocks, but the recent escalation in the Middle East conflict could put pressure on global commodity markets. He says and emphasizes heading into uncharted waters.
“The world is becoming increasingly fragmented,” Saidi said.
We have also experienced major economic changes in recent years, with the world economy shifting towards the East rather than the West.
In 1993, G7 countries produced nearly 50 percent of the world's gross domestic product. Currently, this group accounts for 30 percent of his production, and Asia, especially China, produces nearly 20 percent of her.
“The impact on this part of the world is very clear,” Saidi said. “Our economic, political, defense and other relationships have always been with the West, but our economic geography requires us to shift these relationships toward Asia.”
In his presentation, Saidi argued that one way to resolve some of the dire economic prospects facing the Middle East, particularly the war in Gaza, is to create a regional development bank. There is now a need to focus on “postwar stability, reconstruction, recovery, and a return to the prewar economic legacy.”
“The GCC (Gulf Cooperation Council) must be the main driver of economic stability across the Middle East, because it can do that,” Saidi said. “For this, we must reinvigorate the GCC Common Market and the GCC Customs Union. We need a trade agreement as a bloc of GCC countries. Second, we need to establish an Arab Bank for Reconstruction and Development. Yes, we are the only region in the world that does.”
“We are the only region in the world without a development bank,” Saidi said.
When asked why the Middle East needs a development bank, Saidi replied: “Because so much of our country has been destroyed.”
“We need to help them rebuild. The cost is well between $1.4 trillion and $1.6 trillion, and the list of countries continues to grow. Now we have Gaza and Palestine.”
He said this could be one of the areas of cooperation between the Middle East and Asia.
“A major tectonic shift is heading towards Asia,” Saidi added. “All of our trade deals are with Europe and the United States. That has to change. We have to shift.”
