Middle East Conflict Triggers Global Economic Shock, Hits Developing Nations Hard

ISLAMABAD: The ongoing war in the Middle East has escalated from a regional conflict into a significant global economic crisis, with prolonged disruptions in the Strait of Hormuz leading to soaring oil and gas prices, increased freight and insurance costs, and heightened inflationary pressures.

Rich economies may manage to absorb some of the economic shock, but developing countries like Pakistan are facing severe challenges. The nation is grappling with larger import bills, deteriorating external balances, and limited options for monetary or fiscal relief, making the situation increasingly dire. The conflict in Hormuz is no longer merely a security issue; it poses a substantial economic threat to nations far beyond the battlefield.

Seven months after the initial US-Israel strikes on Iran, the Strait of Hormuz continues to influence global economic sentiment. Approximately 20% of the world’s oil and gas supplies transit through this critical waterway. Brent crude oil prices, which were below $68 a barrel in mid-February, have surged to around $100, reflecting the ongoing instability.

Diplomatic efforts have been made, including Pakistan’s hosting of US and Iranian delegations in April following a two-week ceasefire agreement. However, an interim deal collapsed shortly after its announcement in June, and Iran has recently proposed a revised plan, indicating that the path to resolution remains fraught with challenges.