The history of violence in the Middle East dates back to 1948 immediately after the modern state of Israel was created. The violence started as a result of the Arab-Palestinians’ refusal to recognize the state of Israel and accommodate the European Jews who returned to the land they saw as their ancestral home. Despite several interventions by the United Nations and leading nations across the world, the violence in the region has refused to subside for decades.
From what started as a conflict between the state of Israel and the Palestinians over territory, it quickly deteriorated with the gang up of the Arab world against Israel while the USA and Britain gave military support to the Israelis. In the cause of the conflicts, Israel gained the upper hand and used it as an opportunity to annex more territory from the Palestinians which further escalated the crisis between them.
Though the conflict between Israel and the Palestinians has been going on for decades without any clear solution in sight due to the complex historical issues involved, the recent escalation of violence started as a result of the October 7 attack on Israel last year which was led by Hamas, a Palestinian military organization considered to be terrorists by Israel and most of the western world.
Ironically while most of the Arab countries supporting the Palestinian cause had seized extending military support to them, it was Iran that are majorly Persian that was giving military support to Hamas and Hezbollah which are both considered to be terrorist organizations that are committed to the destruction of the state of Israel.
Up till recently, Iran had been using these two organizations to fight a proxy war against Israel while avoiding a direct conflict. However, recently the veil was lifted with the assassination of Sayyad Khodaei, a senior Iranian Revolutionary Guard Corps (IRGC) officer suspected to have been carried out by Israel’s Mossad Intelligence agency in May 2022, and also the assassination in Tehran of Ali Kamani who was a colonel in the IRGC in April 2023.
These and a series of other events led to an all-out missile and drone attack against Israel by Iran in April earlier this year which Israel responded to by destroying the radar detection system of the Iranians in one of their air force bases. The more recent missile attacks on Israel may have been provoked by Israel’s assassination of top Hezbollah commanders who Iran is backing and also Iranian military generals who were collaborating with Hezbollah.
The escalating tensions between Israel and Iran have sparked fears of a potential war, which would have far-reaching and devastating consequences for the global economy. A conflict between these two nations would affect the Middle East and send global shockwaves, impacting trade, energy markets, and economic stability.
Iran’s strategic location along the Strait of Hormuz, through which 20% of global oil exports pass, makes it a critical player in the energy market. A war would disrupt oil supplies, leading to price spikes and volatility, affecting industries reliant on oil. Israel’s key trade routes, including the Suez Canal and the Red Sea port of Eilat, would likely be affected, disrupting global supply chains and impacting international trade.
The conflict would create regional instability, affecting trade and economic relations between Israel and its neighbours, as well as other countries in the region. The war would lead to decreased investor confidence, reduced consumer spending, higher energy costs, and slowed economic growth worldwide. Disruptions to transportation and logistics will also lead to food and commodity price increases, exacerbating poverty and hunger globally.
The war would also have regional economic consequences which could lead to the collapse of the Middle-East economy as it would devastate the economies of neighbouring countries such as Lebanon, Jordan, Syria, and the Palestinian territories.
The conflict would lead to significant fluctuations in global financial markets, affecting currency values and stock prices. It could also result in a massive humanitarian crisis, with significant loss of life, displacement of people, and damage to infrastructure.
The aviation and shipping industry will also be affected as disruptions to air and sea travel would negatively impact air travel in the region while shipping activities will also suffer a significant decline. The conflict would affect energy production and manufacturing, particularly in industries reliant on oil and natural gas. While Israel’s thriving tech sector would be vulnerable to cyber-attacks and disruptions.
A war between Israel and Iran would have catastrophic consequences for the global economy. The international community must prioritize diplomatic efforts to prevent such a devastating outcome. The economic costs of war would far outweigh any potential benefits, and it is essential to find peaceful solutions to resolve the tensions between these two nations.
Diplomatic efforts should be made by international mediators to encourage diplomatic engagement between Israel and Iran while the Western powers should also consider easing economic sanctions on Iran to incentivize their cooperation. Efforts should also be made to foster regional cooperation and economic integration to reduce tensions amongst countries in the region.
The international community should also invest in peace-building initiatives and conflict resolution mechanisms to ensure that the peace is sustainable. By prioritizing peace and diplomacy, we can prevent the devastating economic consequences of an Israel-Iran war and ensure a more stable and prosperous global economy.
Oshobi, a development economist, management consultant, and author writes from Lagos.