Long before the coordinated bombings on Iran by Israel and the United States, the Tehran regime had been warning for weeks that any attack would trigger a war escalation of the utmost consequences. A month later, the confrontation is already being played out on the battlefield of the economy and threatens to cause a new global recession.
The Strait of Hormuz has shown that, in today's globalized world, controlling a tiny point on the map can have a huge effect on international order. Before the war began, between 100 and 138 ships passed through the strait every day, of which between 60% and 70% carried oil and gas. According to the latest estimates, traffic through the area has fallen by 94%. Now, moreover, the Houthis of Yemen, allies of Iran, have decided to join the conflict, and threaten to block the Strait of Bab el-Mandeb. The disruption at the entrance to the Red Sea and along the entire route to the Suez Canal would translate into a coordinated destabilization of the global economy from both sides of the Arabian Peninsula.
The Middle East conflict has already shown how interconnected countries and supply chains are with energy markets and geopolitics. A fifth of the crude oil and gas consumed in the world transits through Hormuz. And Asia is, by far, the continent most exposed to the effects of this collapse. Approximately 60% of the oil and petrochemical raw materials consumed in the region come from the Middle East. China, India, South Korea, and Japan were the recipients of 50% of the oil that left Hormuz. But Pakistan, Bangladesh, Myanmar, and Nepal have also been forced to impose restrictions on domestic consumption.
Global economic wear and tear is Iran's most effective war weapon to maximize chaos in the Middle East. Disrupting global supply chains and driving up oil prices fuels the economy of fear.
The repercussions are multiple. The Gulf countries are also paying a price they did not expect. It is not just about the destruction of infrastructure and the cost of attacks. In the longer term, companies, investors, and tourists may be slow to return to the Gulf if they are not sure that the war will not end in a false stalemate, as already happened after the twelve days of attacks on Iran last June. The Gulf monarchies feel betrayed. They generously financed Donald Trump and his circle's businesses: a private jet as a gift for the president, substantial contributions to the investment fund of Trump's son-in-law, Jared Kushner, or to Steve Witkoff's cryptocurrency platform, not to mention the millions in technological investments involving Silicon Valley giants. In return, however, they have received a war they did not want.
In Europe, even if the impact on supply is not so significant, price increases will soon reach industrial manufacturing. In the last decade, the EU's dependence on hydrocarbons from the Gulf region had already been reduced. The covid-19 pandemic showed the fragilities of these hyperglobalized value chains and, with the Russian invasion of Ukraine, the Twenty-Seven made an effort to diversify, which, on the contrary, increased their energy dependence on the US. And, precisely, it is these transatlantic dependencies that concern the EU, especially in the face of an Donald Trump trapped in Iran and internally challenged by those opposed to the war in the US. Furthermore, Iran is taking away part of the military and financial oxygen that previously reached Ukraine. Peace talks seem indefinitely stalled, and Russian coffers are reviving with the rise in hydrocarbon prices. Volodymyr Zelenskyy's government is, for the moment, the great European loser of the war in Iran.
The extent of the economic impact, however, depends on the decisions made from now on. The Iranian regime has no other option but to resist and maximize the effects of its attacks. Trump, for his part, has been able to verify what everyone told him: surgical wars do not exist. With the marines already present in the region, he has to decide whether to launch a ground operation and risk an even greater escalation, or whether to end the war as stock market instability and US public opinion demand.
The problem with leaving now is that it leaves the region in an even more dangerous situation than before the attack commanded by Washington and Tel Aviv. Israel only needs to keep adding military victories. It doesn't need an immediate end because the polls play in favor of Benjamin Netanyahu. And the Tehran regime will feel victorious simply by having survived.
