THE ECONOMIC EFFECTS OF A WAR BETWEEN US AND IRAN

As I mentioned in my previous article that was about how to approach from a financial perspective this financial year that just began ( that is linked HERE ) it is important to start this new year in a smart manner.

So let us start with a few broad snippets of news

The killing of Iranian General Qassem Suleimani by the United States of America has the potential to trigger a war with significant economic effects globally.

Perhaps the news about the killing of General Suleimani by the US did not interest you much, especially since we have only entered 2020, and a large part of the Romanian press prefers to allocate more space for traffic on the Prahova Valley.

However, this political event has the potential to trigger a war between the two countries, especially since Iranian leaders have already promised that they will take revenge. Of course, there is no need to expect a conventional war in which the Iranian army will effectively try to conquer the United States with troops arriving on the ocean.

It is also highly unlikely that the United States will launch an “invasion” of Iran, especially since the situation is much more complex than it was in 2001 in Afghanistan or Iraq in 2003. It will be rather a war from a distance. , which will have a number of global economic effects.

THE PRICE OF OIL CAN INCREASE

Iran is the fifth largest oil producer in the world, but the actual volume is quite low: 5% of global production. In addition, in the last year, Iran’s oil production has decreased significantly.

However, Iran plays a key role in the oil industry due to the fact that its geographical position gives it access to the Hormuz Strait, through which about 20% of the total quantity of oil produced in the world is transited.

Should Iran block oil transport in this region, analysts anticipate a significant barrel increase of about $ 150 per barrel, from about $ 68 today. Moreover, the price of the barrel increased by over 3.5% on the first day after Suleimani ‘s assassination.

Earlier, Iranians threatened to block oil supplies through the Hormuz Strait due to US economic sanctions, and last year they were accused of sabotaging oil tankers in the Gulf of Oman, near Hormuz Strait.

THE GROWTH OF THE GLOBAL ECONOMY SHALL SLOW DOWN

Prior to the US-Iran conflict, the World Bank forecast that the world economy will grow by 3.5% in 2020, an optimistic value compared to the 2.4% increase estimated by The Economist specialists.

Almost at a stage of slowing growth, the world economy would immediately suffer in the event of an armed conflict, either from a distance. In Iran, the economy would decline by 12% or even 14%, depending on who makes these estimates. In addition, some economists point out that this growth would become virtually zero in the first half of this year before a slight increase in the second half of the year, partially recovering the decline in the first half.

However, other specialists are more optimistic and anticipate that the gross domestic product globally would suffer a decline of 0.3%, similar to that estimated due to the US-China trade conflict.

STOCK MARKETS MAY RECORD DOWN


The US stock market started 2020 with new historical records, but any armed conflict has the immediate effect of disappearing from the market some investors who are in a hurry to invest their money in goods considered safer, such as gold.

Therefore, a more or less conventional war between Iran and the US could lead to a decline in the US stock market and major European stock markets.

CONCLUSIONS


An armed conflict between the US and Iran will certainly generate a number of negative effects on the world economy. What will be the influence of this war remains to be seen, but the outlook is not at all positive even for the most optimistic specialists.

This context of slowed-down economies and increase in inflation and unemployment that are clear as day will take their toll on people who are not prepared financially, that is why I suggest that you prepare yourself by following the advice from this website – see other suggestions in other articles, for example side hustles that you can find in the menu bar of this website, and so subscribe to get the most quality content straight to your inbox!

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