Israel-Hamas Conflict and Global Economy

The Israel-Hamas conflict unlikely to majorly affect the global economy, says U.S. Treasury Secretary Yellen at IMF meeting.

U.S. Treasury Secretary Janet Yellen has stated that the ongoing war between Israel and Hamas is unlikely to have a significant impact on the global economy. Speaking at the International Monetary Fund (IMF) and World Bank annual meetings in Morocco, Yellen mentioned that while potential economic impacts from the crisis are being monitored, it’s not considered a major driver of the global economic outlook. Thus far, there is no evidence suggesting it will be highly significant.

Stock markets worldwide have, for the most part, disregarded the conflict, with Wall Street even posting gains recently, partly due to a drop in oil prices. The surge in global oil prices earlier in the week was driven by fears of broader instability in the oil-producing Middle East. Some of the concerns include the possibility of stricter sanctions on Iran, which has previously supported Hamas. However, Yellen clarified that the United States has not relaxed sanctions on Iranian oil exports and is vigilant about maintaining these sanctions.

The war between Israel and Hamas is unlikely to have a significant impact on the global economy, US Treasury Secretary Janet Yellen said Wednesday. Source/ Internet

A potential supply shortage could increase pressure on oil prices, which were already high following cuts to exports by significant producers like Saudi Arabia and Russia. Moreover, Chevron announced the closure of a natural gas field off the coast of Israel, which, if prolonged, could lead to reduced Israeli gas exports to neighboring countries, possibly impacting global gas markets and energy prices.

IMF chief economist Pierre-Olivier Gourinchas expressed concerns regarding commodity prices posing a serious risk to the inflation outlook and potentially becoming more volatile due to climate and geopolitical factors. However, he noted that it’s too early to evaluate how the conflict could affect economic growth in the region and worldwide.

As of now, the IMF expects central banks to manage inflation without pushing the global economy into recession. Despite that, the IMF’s latest World Economic Outlook report, drafted before the conflict, indicates that global economic growth remains weak and uneven. The forecast for global economic growth in 2024 was slightly reduced to 2.9%.