Global Economy Shaken by War – Impact of the Iran–Israel Conflict

Introduction

The Middle East region is considered the center of global energy politics. In this region, the Iran–Israel conflict has intensified. Driven by nuclear programs, security politics, and geopolitics, this conflict has reached a stage where it impacts the global economy.

1. Background of the Conflict

The Iranian nuclear program has been a subject of international controversy for many years. The United States and Israel accuse Iran of developing nuclear weapons. However, Iran argues that it is for peaceful energy use (energy security). These conflicting views have led to military confrontations.

2. Military Actions and Tensions

The United States and Israel jointly carried out attacks such as “Operation Epic Fury”. As a result, Iran’s nuclear facilities and military bases were targeted. In retaliation, Iran launched missile and drone attacks. Additionally, the closure of the Strait of Hormuz has severely affected global trade.

3. Global Economic Impact

(a) Energy Crisis:
About 20% of the world’s crude oil passes through the Strait of Hormuz. A 1% supply disruption leads to a 4% price increase. Oil prices may rise up to $200. The IMF has warned of rising inflation.

(b) Supply Chain Disruptions:
Shipping insurance costs have increased 4–5 times. Aviation fuel costs have doubled. Fertilizer (Urea) supply is affected by 30%, leading to higher food prices.

(c) Impact on Countries:
Bangladesh – Fuel restrictions
Pakistan – Government spending cuts, salary reductions
Vietnam – Diesel prices increased by 60%

4. Situation in India

The Essential Services Maintenance Act (ESMA) has been implemented to prevent fuel hoarding. Basmati rice exports have been affected.

Tamil Nadu:
Krishnagiri – Mango exports halted
Karur – Raw material shortage in the textile industry

5. Geopolitical Implications

Gulf countries are reassessing their relationship with the United States. Iran is attempting to increase its regional influence. Maritime transport security has become a major concern.

Static Linkages

Geography: Importance of the Strait of Hormuz
Economy: Demand-Supply, Inflation, Energy Security
International Relations: West Asia Politics, Non-Proliferation Treaty (NPT)
Disaster & Crisis Management

Conclusion / Way Forward

This conflict poses a major threat to the global economy. Immediate peace negotiations, alternative energy sources (renewable energy), and international cooperation are essential. In the long term, it is important to reduce dependence on fossil fuels and build a diversified economy.