Impactos económicos globales de la guerra en Palestina

The ongoing conflict between Israel, Hamas, and various armed groups in Gaza has led to an unprecedented loss of life, primarily among Palestinians. Despite this, the impact on financial markets and the economy has been limited so far. The price of oil rose by 7% following Hamas's attack, reaching $90 per barrel, but it remains below the prices observed at the beginning of October.

This reaction aligns with historical occurrences, as neither Israel nor Palestine are significant crude producers or energy transit zones. The rise in oil prices was attributed to the risk of escalation involving Iran, which supports Hamas and accounts for 3% of global oil supply. This year, Iran's increased oil production contributed second-largest to the global oil supply, alleviating some of the oil tensions due to Saudi Arabia and Russia's voluntary output cuts and OPEC+'s agreements.

However, Iran controls the Strait of Hormuz, a crucial maritime route through which Iraq, Kuwait, Saudi Arabia, the United Arab Emirates, and Qatar's oil, and Qatar's LNG pass (accounting for 20% of the global crude offer and 25% of the LNG traded via sea). Any event that jeopardizes this trade leads to geopolitical premiums on energy assets.

Most analysts agree that actors in the region do not want the conflict between Israel and Palestine to escalate further. For Israel, avoiding a multi-front war is paramount, while economic collapse in Lebanon, and severe economic conditions in countries like Egypt, Jordan, Syria, and Iran are concerns. Iran's recent economic relief is due to increased oil exports and its agreement with the US for certain exchanges.

If the conflict escalates, the gains made in these areas would be threatened. The Arab world fears that the Palestinian cause could destabilize the region, leading to resolutions for ceasefire from Russia and Brazil. However, non-state actors, especially Hezbollah from Lebanon, and other groups from Syria, Iraq, and Yemen may intervene in response to Israel's devastating counter-offensive against Gaza.

In the event of a limited regional escalation, including confrontations in the West Bank and border areas of Israel with Lebanon and Syria, as well as attacks on US interests in the region, the economic and financial impacts would be more pronounced, albeit contained. The involved territories are not energy exporters, do not serve as energy transit zones, and have limited economic and financial ties with the west.

The tension in energy markets would be exacerbated by the fear of a direct confrontation with Iran or potential sabotage, such as the incident in the gas pipeline between Finland and Estonia or any incident in the region's hydrocarbon infrastructure. This would lead to higher asset risk premiums, persistent inflation, and increased difficulty for central banks to conclude interest rate hikes. The greater uncertainty could dampen agents' expectations and economic growth prospects.

In the case of a regional escalation without direct confrontation with Iran, the economic and financial impacts would be more notable but manageable. The next step in escalation, less likely but potentially impactful, involves a direct confrontation with Iran. In this scenario, US military involvement is more probable. Any impact on Iran's production or exports could result in Iran's interruption of energy transit through the Strait of Hormuz.

Analysts have pointed out that in this scenario, Brent could surpass $150 per barrel, potentially plunging several countries into recession. Comparisons have been made to the 1973 Yom Kippur War, when Arab countries imposed an oil embargo after US support for Israel. However, today's context is markedly different: the US is a net exporter of oil and LNG, most Middle Eastern countries depend economically and militarily on the US, and they have invested a large portion of their reserves in the US, which could face sanctions as occurred with Russia over its invasion of Ukraine.

The global economy does not have room for another energy crisis, which would be larger than the one arising from the Ukrainian conflict. Oil shocks have broader impacts compared to gas price spikes due to their transportation effect and the cascading impact on other commodities. The global economy is still recovering from the Covid pandemic, there is no pent-up savings, US interest rates are above 5%, EU rates above 4%, global inflation is at 1997 highs, and many southern countries face debt risks. Strategic oil reserves in the US are at 1983 lows. The EU and Spain are particularly dependent, importing over 90% of their oil consumption.

On the global level, oil reserves are down 25% from pre-Russian invasion levels due to coordinated use of strategic reserves by the International Energy Agency and massive use by the US to reduce gasoline prices before mid-term elections (reserves have dropped 40% since February 2022 and are at 1983 lows).

In the event of an oil shock, the US is legally obligated to assist Israel, but it is expected that the US will prioritize its domestic market over its global exports, especially given the upcoming US presidential election in 2024. In this scenario, oil-producing countries like Saudi Arabia,