How the Israel-Hamas war will affect the world economy?

The Israel-Hamas war has led to a growing humanitarian crisis grappling the world with unprecedented challenges and complex situations. This will have a profound impact on the world economy.

1. Let's look at the Recent Developments of the Israel-Hamas War:
   • Tensions in the Middle East escalate as Israel’s Prime Minister has pledged to destroy the Gaza strip.
   • As Israel’s army prepares to invade Gaza, Israel has urged civilians to evacuate immediately.
   • In a worrying turn of events, Lebanon based militants which include Hezbollah, the Iranian ally of Hamas have already launched airstrikes against Israel forces on the northern borders.
   • The situation will be further complicated if, Tehran backed militias in Lebanon and Syria which support Gaza join forces with Hamas.
   • Such developments on the northern borders highlight the risks of the conflict spreading to Lebanon and Syria where Iran supports many armed groups, which can ignite another war between Iran and Israel.
2. What will be the possible outcomes?
   • While, the situation of war seems relatively low, but if it does take place, the consequences will be extreme.
   • This will put the global economy at risk, causing a massive increase in oil prices as high as 140$ per barrel.
   • The Arab-Israel war of 1973 which led to an oil embargo and years of stagflation in the industrial economies, serves as the classic example of the economic implications of such conflicts.
   • Looking at the current scenario, the U.S Federal Reserve’s aim to bring down inflation to 2% seems unattainable.
   • Also, the likelihood of another regional war may push the global inflation rate to 6.7% next year.

The Israel-Hamas crisis has become a global tension, if conditions further deteriorate, what will powerful nations like United States of America do?

The course of action in response to this crisis is uncertain, especially considering the close alliance between the United States and Israel, as well as the strong relationships between China and Russia with Iran.

With the Russia-Ukraine conflict, rising trade tensions between U.S-China and escalating tensions between China-Taiwan, will it be right to say that Geopolitics has taken up the important role of steering both the global economy and the market outcomes?

The outcome depends on the unpredictable nature of wars and how this situation evolves in the coming weeks or months.