The crises caused by the Iran war will hit the world in four waves
Summary
The war involving Iran will have long-lasting effects that go beyond the fighting itself. Its impact will spread through the global economy in four waves, affecting energy prices, trade routes, developing countries, and more, even after any peace deal is signed.Key Facts
- Wars cause damage that lasts years due to their effects on global trade, prices, and political stability.
- The 1990 Gulf War affected Iraqi oil production for a decade and resulted in large compensation payments until 2022.
- The Iran war's first wave hits energy markets, raising oil, natural gas, and fertilizer prices, which then increases food and goods prices worldwide.
- The second wave involves lasting changes to global trade routes and systems, such as disrupted shipping in the Red Sea that has not returned to normal.
- The third wave harms poorer countries more severely, forcing them to cut imports and causing hunger because they spend more of their income on food.
- Advanced economies can handle energy and shipping shocks better using reserves and fiscal tools, unlike developing nations.
- These economic effects redistribute wealth from the poorest households to commodity exporters and financial sectors.
- Ceasefires or peace agreements do not resolve these deep economic problems caused by war.
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