The war between the United States, Israel and Iran has already begun to affect the global economy. The sharp rise in oil and gas prices could hit European and Asian economies the hardest, while the US economy may prove less vulnerable. This is reported by the Financial Times, citing economists and analysts.
Since the beginning of the conflict, the price of Brent crude has risen by nearly 30%, while European gas prices have increased by about two-thirds. If energy prices remain at current levels, this could lead to higher inflation, declining purchasing power and slower economic growth in many countries.
Europe may prove particularly vulnerable. According to estimates by the consulting firm Oxford Economics, Italy could be the most affected country: inflation there may end up more than one percentage point above previous forecasts by the end of the year. A significant rise in inflation is also expected in Germany and the United Kingdom, two economies that remain highly dependent on gas imports. In these countries, inflation could increase by more than 0.5 percentage points.
In the United States, the consequences are expected to be much more limited. Economists believe inflation there may rise by no more than 0.2 percentage points.
Beyond Europe, the shock could also hit major energy importers in Asia, particularly India, South Korea and China. These countries rely heavily on oil and gas imports from the Persian Gulf.
According to the Financial Times, China imports around 70–75% of the oil it consumes. However, Beijing may partially offset rising prices by increasing imports from Russia.
At the same time, some countries could benefit from the energy crisis. The Financial Times notes that countries such as Norway and Canada could emerge as winners. Both are major exporters of oil and gas and are not exposed to the geopolitical risks faced by producers in the Middle East.
The United States may also be less affected than other economies. Thanks to the “shale revolution,” the country has become the world’s largest producer of oil and gas, significantly reducing its dependence on energy imports.
Nevertheless, no economy will be able to fully avoid the negative consequences. According to James Knightley, chief economist at ING, rising energy prices will still weigh on economic activity.
“Everyone will be worse off because energy, a key input into production, becomes more expensive. But the impact will be uneven,” said David Aikman, director of the policy and research centre at the UK’s National Institute of Economic and Social Research.
