The conflict along with posing a structural shock to world economy is reshaping key aspects from global commodity markets, industrial supply chains, financial conditions and geopolitical alignments.
Key Impacts of the Conflict
- Shipping Routes: Strait of Hormuz, narrow sea passage between Iran and Oman, is a chokepoint for commodity flows, faces repeated disruption.
- Industrial Supply Chains: E.g. Supply of Helium, crucial for semiconductor manufacturing, medical imaging and other high tech uses is impacted due to production disruptions in Qatar (contributing to one-third of its exports).
- Global Food Systems: Gulf is a major artery for urea, ammonia, sulfur and other fertilizers.
o India is heavily dependent on imports of LNG (Liquified Natural Gas), used for fertilizer production.
- Asymmetrical Geographical Impact: While US imports of oil through Strait of Hormuz is little, the Asian economies are facing the burden as more than 80% of oil and LNG (Liquefied Natural Gas)shipped through it in 2024 went to Asian markets.
- Risks to Economic Policies: Risks of Stagflation (high or rising oil prices would push up inflation and pull down growth) making it difficult to manage such situations through monetary policy tools.
The present conflict has exposed the reality of Gulf region as a strategic theatre where economic, political and social interests intersect requiring diverse partnerships and flexible diplomacy to deal with such crisis.
