Iran war’s economic fallout

The widening war in Middle East is no longer just a regional security crisis but is likely to lead to a massive global economic fallout, and India could be one of the most affected countries. India imports roughly 50 percent of its total crude oil through Strait of Hormuz, and the war could disrupt that. If the war prolongs, not only is there every chance of the oil installation getting hit but the global energy supply lines through the region will also be suspended - specifically the narrow stretch of water known as the Strait of Hormuz.

Roughly one in five barrels of the world’s oil passes through this chokepoint. If conflict disrupts shipping there for any sustained period - and which it already has - the consequences would be global. Oil prices, already climbing, could easily breach $100 a barrel. A sharp spike in oil would raise fuel costs, squeezing household budgets.

The pain would be global: the world heavily dependent on Gulf energy flows would feel the shock. But the tragedy is we are heading in that direction only. If the war drags on, as looks likely. the energy infrastructure and shipping lanes could become targets. Iran has made no secret of its intention to pursue this path if the US and Israel press on with their regime change operation.

The problem for India is further compounded by the war expanding to major Gulf countries such as Saudi Arabia, UAE, Qatar, Bahrain, bringing their economies to a temporary standstill. A drawn out war can further bog these countries down, setting back their growth. This doesn’t bode well for the nine million Indians who work in the Gulf and send remittances back home. Other countries will be also impacted.

This has created an imperative for the major powers like China, Russia and India to work towards de-escalation and bringing this conflict to a close. This is not only about stabilising a volatile region but also about protecting livelihoods across continents.