The bombings that have been shaking the Middle East since Saturday are having immediate effects on the global economy. Gas and oil, widely produced in the region, are seeing their prices soar, with Dutch TFF, a European gas reference, rising by up to 50%, and oil barrels flirting with $80. These increases are due to both the bombings on oil infrastructure and the blocking of oil tankers in the Strait of Hormuz, bordered to the north by Iran and monitored by the Revolutionary Guards. One out of every five oil barrels in the world typically passes through this narrow sea passage between the Arabian Peninsula and Iran. These ships must now take detours, but the Suez Canal, which opens up to the Mediterranean, is not a better option. Additionally, the Houthi officials in Yemen, armed by Tehran, have warned that “the first strikes will take place soon.” Airspace is also compromised, with many flights canceled, leaving thousands of tourists stranded without repatriation options, while Iran’s neighbors are targeted by missiles and drones from the Tehran regime. The tourism industry is suffering as a result. As for European and Asian stock exchanges, they were clearly down on Monday. Wall Street fared better at closing, but if oil prices remain high, this should translate into higher consumer goods prices, a resurgence of inflation, and potentially central banks’ interest rates being revised upwards. The duration and intensity of the conflict will determine the extent of the domino effect on the global economy.
