IRM Press Release/ Oct 2023 - How Israel-Palestine conflict will affect global economy 2023 | Impact on Global, US and India Trade
The Israel-Palestine conflict has had a complex and multifaceted impact on world trade and the global economy. While the conflict itself is primarily a regional issue, it has ripple effects that extend to various parts of the world, including trade, investment, and geopolitics. Here are some key ways in which the conflict has influenced the world trade and economy:
1. Oil Prices and Energy Security: The Middle East, including Israel and the Palestinian territories, is a major oil-producing region. Any escalation of conflict in the area can lead to increased oil prices, which have a direct impact on the global economy. Higher oil prices can increase production costs, transportation costs, and inflation, affecting businesses and consumers worldwide.
2. Investor Sentiment: Political instability in the region can affect investor sentiment and confidence. When the conflict flares up, investors may become more risk-averse, leading to fluctuations in financial markets. This can impact the valuation of assets and investments globally.
3. Regional Trade Disruptions: The Israel-Palestine conflict has resulted in the imposition of trade barriers and restrictions in the region. These barriers can disrupt the flow of goods and services, affecting businesses and supply chains that rely on the region for trade.
4. Global Diplomacy and Alliances: The conflict often puts global superpowers like the United States, Russia, and China in positions of influence and diplomacy. The stance of these countries can affect their relationships with other nations, potentially leading to economic repercussions through sanctions, trade agreements, or alliances.
5. Humanitarian Aid and Assistance: The conflict has also prompted humanitarian efforts and foreign aid from various countries and international organizations. This financial assistance can have a direct impact on donor economies, as resources are allocated for aid and relief efforts.
6. Technology and Innovation: Israel, in particular, has a vibrant technology and innovation sector. Its contributions to fields such as cybersecurity, biotechnology, and artificial intelligence have global implications. The conflict can indirectly affect international collaborations and investments in these sectors.
6. Consumer Boycotts and Protests: Civil society movements and consumer boycotts related to the Israel-Palestine conflict can impact the sales and reputation of companies with ties to the region. Such boycotts can have economic consequences for these companies, especially those operating in the global market.
7. Geopolitical Stability: The conflict contributes to overall geopolitical instability in the Middle East, which can have long-term implications for trade routes, energy transit, and regional stability. Disruptions in these areas can affect global trade and economic stability.
8. Tourism: Tourism is a significant industry in both Israel and the Palestinian territories. Escalations in the conflict can deter tourists from visiting the region, impacting the tourism sector's revenues and employment opportunities.
In summary, the Israel-Palestine conflict has the potential to create economic uncertainties and disruptions on a global scale. While its immediate impact may be felt most acutely in the Middle East, the interconnectedness of the global economy means that instability in one region can have far-reaching consequences. Diplomatic efforts to resolve the conflict and promote stability in the region are essential not only for the well-being of the people directly affected but also for the broader global economy.
Global Impact
The fallout of the Israel-Hamas war on the global economy may take time to become clear but would become more severe if the conflict spreads to the rest of the Middle East, especially Iran, which is both a major oil producer and supporter of Hamas1. The conflict could have profoundly negative economic consequences for both Palestinians and Israelis; per capita gross domestic product would fall by 46 percent in the West Bank and Gaza and by 10 percent in Israel by 20242.
Impact on India’s Trade
Even as intense fighting is underway between Israeli soldiers and Hamas fighters in the streets of southern Israel, its impact on India’s foreign trade may not be material3. However, India’s big G20-led trade ambitions are likely under threat from the Israel-Hamas conflict4.
Impact on US Trade
The United States is a standout in the IMF’s latest World Economic Outlook, which was completed before the outbreak of war between Israel and Hamas. The IMF upgraded its forecast for U.S. growth this year to 2.1% (matching 2022) and 1.5% in 2024 (up sharply from the 1% it had predicted in July)5. However, if Israel concludes that Hamas acted on instructions of Tehran, oil prices could go much higher6.
In conclusion, while the immediate impact of the conflict on world trade might not be substantial, the potential for escalation and its implications for global oil prices could have far-reaching effects on the global economy.
Rishaan Trivedi
Key Account Manager
E: sales@industryresearchmarket.com
www.industryresearchmarket.com
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