Israel's Ongoing Conflict in Gaza and Its Economic Impact
The ongoing conflict in Gaza has not only devastated the region but also inflicted significant damage to the global economy, particularly affecting Israel's economic stability. Recent reports indicate that Israeli government spending has soared to over $140 billion, with losses from attacks in Lebanon estimated at around $15 billion. Dr. Ziad Al-Hashemi, an international economics consultant, highlighted during an international symposium that the Israeli economy contracted by 27% in the last quarter of 2023, with projections of zero growth until year-end. The Israeli shekel has also depreciated against the dollar, leading to a downturn in the stock market, particularly in the technology sector, which constitutes 31% of Israel's GDP.
The war has also disrupted maritime transport routes, forcing a diversion from the Red Sea to longer, more costly paths. This shift has raised transportation costs significantly, impacting international shipping efficiency and increasing insurance premiums due to heightened security risks. Notably, the Houthis in Yemen have targeted vessels heading to Israel, exacerbating these challenges.
Commodity prices have surged in Europe and the U.S., with some items experiencing price increases of up to 300%. Egypt has been notably affected, with Suez Canal traffic halving, resulting in a $6 billion drop in revenues. Gulf countries have seen shipping costs rise by 150%, although there are signs of gradual recovery in transportation movements.
Political Ramifications and Regional Security Concerns
The conflict has triggered discussions about potential political transformations in the Middle East, particularly amid the competition between the United States and China for influence in the region. Dr. Mohammed Ihsan, a former Minister of Human Rights in Iraq's Kurdistan Regional Government, emphasized the Middle East's strategic importance, especially regarding energy resources. He noted that Israel's actions are aimed at dismantling the resistance axis, particularly targeting Hezbollah in Lebanon, which poses a security threat.
The escalation of hostilities, particularly since October 7, 2023, has shifted traditional rules of engagement, complicating prospects for a peaceful resolution. Dr. Aqil Abbas, a Middle Eastern affairs expert, warned that the conflict might persist for years, as Iran feels the repercussions of its regional policies amid increasing international pressure.
Security expert Sarmed Al-Bayati expressed concerns about the potential for a broader regional conflict, particularly given Iraq's historical military exhaustion. While Iraq is set to receive an advanced air defense system from South Korea in 2025, it currently lacks the offensive capabilities to counter threats from Israel, heightening the risk of escalation.
