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🇰🇷 South Korea /Conflict & Security

Global Economies Suffer as US-Iran Conflict Spares America

From Hankyoreh · (8m ago) Korean Critical tone

Translated from Korean, summarized and contextualized by DistantNews.

TLDR

  • Global economies are suffering from economic hardship due to the US-Iran conflict, while the US remains relatively insulated.
  • The conflict's impact includes rising oil prices, increased fertilizer costs, and a heightened risk of food crises, particularly in developing nations.
  • While the US benefits from robust domestic oil production and a service-oriented economy, prolonged high oil prices could still pose a significant threat.

The ongoing conflict between the United States and Iran, amplified by global tensions, is inflicting severe economic pain across Asia, Europe, and Gulf nations. Yet, remarkably, the United States appears to be weathering the storm with significantly less impact. This resilience is attributed to several factors, including the nation's substantial domestic oil production, which helps mitigate the shock of rising global prices, and an economic structure heavily weighted towards the service sector rather than energy-intensive manufacturing.

In stark contrast, developing countries are bearing the brunt of the crisis. The potential disruption of oil supplies through the Strait of Hormuz has sent fertilizer prices soaring, raising the specter of widespread food shortages. International bodies like the IMF and UNDP have issued dire warnings about escalating food crises in Africa and the risk of millions falling into poverty in Asia. The ripple effects are palpable, with workers in India reporting job losses and reduced wages directly linked to the conflict's economic fallout.

The frog is in the water, and the water is boiling. The temperature is continuously rising. We will see more and more industrial facilities closing down.

— Raghuram RajanProfessor at the University of Chicago and former Governor of the Reserve Bank of India, describing the escalating economic impact of the conflict.

Even developed economies in Europe are feeling the pinch, with airlines like Lufthansa forced to cancel thousands of flights due to doubled jet fuel costs. Gulf states, despite their oil wealth, are also experiencing economic strain, with the UAE seeking currency swaps with the US due to reduced dollar revenues from oil and gas transport disruptions. While the US economy shows signs of strength, with a growing GDP and strong consumer spending, experts caution that prolonged high oil prices—potentially lasting years—could still destabilize the American economy, underscoring the interconnectedness of the global financial system.

We are better able to withstand energy shocks, but it is unlikely that such a situation will last for a long time.

— Adam PosenPresident of the Peterson Institute for International Economics, commenting on the US's resilience to energy shocks.
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Originally published by Hankyoreh in Korean. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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