prisha1

Hamas attacked Israeli territory, leading to a war where Israel bombarded Gaza Strip and killed thousands of people. Palestinians are trapped and facing a humanitarian crisis with basic amenities cut off. The economic impact is significant, with rising oil prices and global risk. If the conflict escalates and involves Iran, oil prices could reach $150 a barrel and global growth could drop to 1.7%, causing a recession. And this brings us to today. On October 7, 2023, Hamas broke into Israeli territory, launched rockets, killed over 1,400 civilians, and kidnapped close to 200 people. Within days, Israel formally declared war and bombarded the Gaza Strip, killing thousands of people. Israel also told over 1 million citizens of Gaza to leave their homes and move towards southern Gaza, warning them of an escalation of violence. But Israel is bombarding the south too, leaving Palestinians trapped. Since the past five weeks, the people of Palestine have been bombarded with more than 12,000 tons of explosives at the hands of Israeli forces. The Israeli government has cut off basic amenities like food, water, and access to healthcare. The Israeli military has attacked places of worship, schools, hospitals, and refugee camps, killing more than 10,000 Palestinians in just four weeks. But the economic impact of this war affects the world greatly. From a global economic perspective, energy is the most important short-run issue. Oil prices were already elevated at the time of the attack on Israel, and these developments raise the probability of supply disruptions, particularly if the crisis involves Iran or if unrest takes a toll on production in Iraq, and market nervousness more generally. Rising geopolitical tensions generally take a toll on global risk and sentiment, widening spreads and putting forward upward pressure on the dollar. The ensuing tightening in global financial conditions can have several repercussions for economies with external exposures. A sharper escalation could bring Israel into direct conflict with Iran. A supplier of money and arms to Hamas, which the U.S. and the European Union have designed a terrorist group. In that scenario, Bloomberg Economics estimates oil prices could soar to $150 a barrel and global growth drop to 1.7%, a recession that takes about $1 trillion of world output.