Energy and markets under pressure
As the US-Israel conflict with Iran enters its third week, the impact extends far beyond the battlefield. Energy markets, stock exchanges, and national budgets are under unprecedented strain, with early estimates placing the cost at over $11 trillion in ammunition, extra oil expenses, and market losses. Global oil markets face the largest supply disruption in history, while traders closely monitor developments in the Strait of Hormuz.
Oil volatility and emergency measures
Analysts anticipate another week of turbulence, with Brent crude remaining above $100 per barrel and rising as high as $119.50, the highest since 2022. Despite the International Energy Agency releasing 400 million barrels from strategic reserves to Asia, the pace of delivery remains critical for stabilising prices. Asian buyers, heavily reliant on Middle Eastern oil, are particularly affected, with Japan releasing a record 80 million barrels to cover 45 days of energy demand. Supplies for Europe and the US are expected only by late March.
Market instability
Even minor news has triggered significant market reactions. A temporary tweet from US Energy Secretary Chris Wright about naval escort of a tanker through the Strait of Hormuz caused extreme price swings before being deleted. Stock markets have dropped sharply, with South Korean equities falling, European natural gas futures rising 68% in two days, and currencies such as the Indian rupee and Egyptian pound hitting historic lows. Traditional safe havens like gold, the yen, and the Swiss franc have also weakened amid rising energy prices and inflation concerns. Global market capitalisation fell from $157.5 trillion at the end of February to $151.5 trillion in early March.
Economic impact on the Gulf and winners
Gulf economies are among the hardest hit. Qatar and Kuwait could see GDP shrink by up to 14% if maritime disruptions continue through April. Gulf oil producers have already lost around $15 billion in energy revenues, with Saudi Arabia alone losing an estimated $4.5 billion. In contrast, US oil companies could gain up to $63.4 billion if crude prices remain near current levels.
War expenditure
The cost of conflict escalates daily. US military operations in the region spend roughly $15.4 million per day for naval operations alone. The Center for Strategic and International Studies estimates daily US costs at $891.4 million, with aerial bombing alone costing $30 million daily. Analysts note that each $1 attack from Iran requires $28 in US defence spending due to expensive interceptors targeting comparatively cheap drones. Historical conflicts in Iraq and Afghanistan illustrate that final costs can vastly exceed initial projections, reaching trillions over time.
Also read: EU announces €458m humanitarian aid for Middle East
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