A month of a regional war that impoverishes us all
No one could have imagined, when the US and Israel launched the first attacks against Iran on Saturday, February 28, that especially Washington and, specifically, US President Donald Trump, had not foreseen the consequences. The evolution of events makes it increasingly clear: there was no strategy. At least, not on the part of the US. Another thing is the government of Benjamin Netanyahu, which takes advantage of the opportunity to achieve its expansionist goals, with no regard for international law and human rights.
A month after the start of the conflict, the religious and authoritarian regime in Tehran has also managed to respond with a clear strategy, consisting of extending hostilities to all the oil monarchies of the Persian Gulf. And also by closing the Strait of Hormuz, through which one-fifth of the world's oil and gas supply passes. And now, with the threat of putting a padlock on another essential route, the Bab el-Mandeb Strait, which connects the Red Sea with the Gulf of Aden and, from there, with the Indian Ocean, and which is also the shortest route between Europe and Asia via the Suez Canal.
The scope of the battle means that one of the few victories Trump can claim is opening the Strait of Hormuz, which, incidentally, was already open before the conflict. And now, moreover, we don't even know when it will be possible to navigate it, and it will probably have to be paid for to pass through. All of this will increase the cost of transport, which has already seen insurance and all related costs skyrocket.
The markets seem to have gauged Trump, and despite his announcements, advances, and setbacks, the price of oil has risen by more than 50% since the attacks began. And although crude oil weighs less than in the crises of the 1970s – less energy is used per unit of gross domestic product (GDP) – contagion exists. It is noticeable at the gas stations, which is why the Spanish government has launched a package of 5 billion euros to mitigate its effects.
The advanced consumer price index (CPI) for March, the first to reflect the war's impact, has soared from 2.3% in February to 3.3%, and the Bank of Spain calculates there will be less growth and more inflation. In short, with each euro we will be able to buy fewer things and, although the initial impact on fuel has not been fully transferred to the rest of the economy and especially to the shopping basket, everything will depend on time.
We are getting poorer as a consequence of a war which, far from leading to the fall of an authoritarian regime and lacking the support of international law, could lead to less growth. And this, combined with more inflation and the increasing cost of financing for families and businesses with interest rate hikes to contain prices and, therefore, less employment. In any case, amidst this context, which will be more negative the longer the war lasts, there is some positive element, such as a greater role for renewable energies, which have prevented electricity from rising as much in Spain as in Germany or Italy, due to lower dependence on gas. But the damage is already done and the impact will continue to grow, even if the conflict ended in a few hours. That is why the Spanish government will do well to have more measures ready to counteract damages that will be greater the longer the blockade of the Strait of Hormuz and the war last.