How the conflict unfolds will have implications for a global economy already battered by a series of shocks, says the Financial Times’ Martin Wolf.
A picture taken from Israel's southern city of Sderot shows smoke rising during Israeli bombardment on the Gaza Strip. ? The answer was surely to set the region aflame. More narrowly, it was to provoke the response we see, with inevitable consequences for Israel’s global reputation and the prospects for peace in the region.The way this unfolds will have implications for human lives, the regional balance of power and perhaps even global peace.
A chain of disastrous events might, he notes, spread to the Gulf itself. It could even lead to conflict among superpowers. The World Bank also notes that past energy shocks have been significantly costly. Iraq’s invasion of Kuwait in 1990 raised average oil prices three months afterwards by 105 per cent, the Arab oil embargo of 1973 to 1974 raised them by 52 per cent and the Iranian revolution of 1978 raised them by 48 per cent.
Nevertheless, oil remains a vital transportation fuel. Liquid natural gas from the Gulf is also an important part of global supplies of natural gas. Big disruptions to these supplies would have a powerful impact on energy prices, global output and the overall price level, notably in foodstuffs. Hamas might wish the region to be aflame. But that is certainly not going to be in the interests of the billions of people who want to get on with their lives as best they can. It is up to policymakers in the region and outside to avoid the sorts of mistakes that have proved devastating in the past.
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