War in the Middle East: Global Economic Consequences

Here are the latest global economic developments on Wednesday around 11:30 PM GMT, on the 33rd day of the conflict in the Middle East.

Global Stock Markets Optimistic for Swift Resolution Global stock markets benefited from a wave of optimism on Wednesday following President Donald Trump’s remarks envisioning the end of the conflict within “two to three weeks.” European stock markets ended significantly higher, with the Paris Stock Exchange rising by 2.10%, Frankfurt by 2.73%, London by 1.85%, and Milan by as much as 3.17%. On Wall Street, the Dow Jones gained 0.48%, the Nasdaq advanced by 1.16%, and the broader S&P 500 index increased by 0.72%. As the global crude oil benchmark, the Brent barrel from the North Sea for delivery in June dropped by 2.70% to $101.16, after a more than 5% decline. Its American equivalent, WTI for delivery in May, fell by 1.24% to $100.12.

France: Task Force on Transport Sector The French Business Mediator is leading a mission on the transportation sector to ensure that major clients do not worsen the financial situation of small businesses due to “selfishness” amidst the conflict.

Fuel: French Government Considers Energy Saving Measures The French government is set to implement energy-saving measures in case of fuel supply difficulties, as stated by spokesperson Maud Bregeon, without further elaboration. SP95-E10 reached the symbolic threshold of 2 euros per liter on Wednesday, with about 10% of France’s over 9,500 gas stations facing shortages of at least one of the main fuels.

USA: Decline in Strategic Petroleum Reserve The United States’ strategic petroleum reserve saw a reduction in oil reserves last week for the first time since the conflict began, according to data released by the US Energy Information Agency (EIA), while commercial stocks continued to increase.

Bank of England Warns of Financial Stability Threat The economic shock from the ongoing conflict is posing risks to the stability of the British financial system, cautioned the Bank of England (BoE). The conflict represents a negative supply shock to the global economy, raising the likelihood of inflationary pressures, higher interest rates, and weaker growth worldwide, as per the Wednesday statement by the BoE.

World Bank Expresses Concern The World Bank’s Managing Director, Paschal Donohoe, expressed deep concerns regarding the impact on the global economy, particularly for countries already struggling with multiple global crises. “We are very concerned about the implications for inflation, jobs, and food security, which is why we are preparing to provide assistance to countries in need,” he told AFP.

Germany: Economic Recovery Hindered The energy shock triggered by the conflict is expected to dampen the German economic recovery, making additional public investments crucial, according to leading German economic institutes. They predict that Germany’s Gross Domestic Product (GDP) will grow by 0.6% in 2026 and 0.9% in 2027, representing a decrease of 0.6 and 0.5 percentage points compared to the autumn projections.

UK: International Meeting to Secure the Strait of Hormuz “The UK has now gathered 35 nations around our statement of intent to stand together for maritime security in the Gulf,” announced British Prime Minister Keir Starmer, while announcing the upcoming meeting “this week.” This virtual meeting on Thursday will bring together representatives from around thirty countries to rally for restoring and securing maritime transport safety in the Strait of Hormuz once hostilities cease.