Now, top international financial institutions, including the IMF, project a global “growth downgrade” due to supply disruptions, significant infrastructure damage across the Gulf and Iran and the lack of customer confidence.
The UNDP also predicted that the war might put at least 32 million falling into poverty globally.
“Had it not been for this shock, we would have been upgrading global growth,” IMF managing director Kristalina Georgieva said in a speech last week in Washington.
Rising economic volatility could also create opportunities for speculation in commodity markets, accelerating global capital flows depending on the scale of political and economic risks, according to a senior adviser to the Turkish Central Bank, who spoke on condition of anonymity due to official restrictions.
“Due to much uncertainty generated by the blockade and Iran war, their full impact on regional and global economics is not yet accurately predictable. The only thing certain is a lasting loss of output losses,” he tells TRT World.
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The adviser also notes that Israel’s economy, which is less directly tied to trade through the Strait of Hormuz than oil-exporting Gulf states and major energy-importing countries such as China, India, and Japan, is likely to be minimally affected by a US blockade.
Many experts, however, argue that Israel has drawn the United States into an unnecessary war with Iran, undermining not only Washington’s global political standing but also the economic interests of Gulf states, which depend heavily on the Strait of Hormuz for both food imports and oil and gas exports.
“Tensions and blockade will lead both the Gulf countries’ positioning in regional/global finance, logistics and supply chains and Iran’s political landscape to certain shifts, most possibly in a negative way. It has been so far a lose-lose game for the entire region,” says Babacan.
A recent WSJ report suggested that Saudi Arabia lobbies against the longevity of the US blockade, while there have been no actual statements from Gulf states against Trump’s latest measure on Iran.
‘Don’t capture a Chinese vessel!’
While Trump’s blockade of the Strait of Hormuz has been in effect since Monday, a US-sanctioned Chinese vessel, Rich Starry, transited the waterway on Tuesday without any American intervention, according to shipping data from the London Stock Exchange Group (LSEG).
“Our ships are moving in and out of the waters of the Strait of Hormuz,” said China’s Defence Minister Dong Jun, in a clear defiance to the US blockade. He warned Trump that Beijing has “trade and energy agreements with Iran” and the US needs to respect them and “not to meddle in our affairs”.
In a quiet nod to Tehran’s position, the defence minister also added that “Iran controls the Strait of Hormuz, and it is open to us,” calling the US blockade “reckless”.
According to Luciano Zaccara, a Gulf-based political analyst specialising in Iranian and Middle Eastern politics, Trump’s advisers reportedly warned him not to “dare to capture a Chinese vessel”, referring to the passage of a Chinese ship through the US blockade, which he describes as “a clear escalation and unnecessary step”.
“Well, it looks like the US blockade, so far, is a bluff, since already Chinese ships crossed the strait without problems,” Zaccara tells TRT World.
Experts warn that if the blockade is fully enforced, Pacific-Asia economies would be among the hardest hit, as most of their energy imports come from the Gulf region. A recent UNDP estimate also suggests the region could face output losses of between $97 billion and $299 billion due to rising costs for transportation, electricity, and food.
“The uneven consequences of the sudden disruption in oil transportation will lead to much significant unfavorable repercussions on Asian economies such as China, India, Pakistan, Bangladesh, Philippines and Indonesia in terms of global supply chains while it will have less significant impact on European economies,” says Babacan.
Other experts note that Asian states such as South Korea and Japan, both close US allies, rely heavily on oil imports from the Middle East and could face serious difficulties in the event of a US blockade on Gulf energy exports.
While Asian economies would be the most vulnerable to both the war and a blockade, which could trigger an oil crisis across the region, their losses would also ripple globally, as the world’s most populous continent accounts for more than half of global manufacturing, according to Gur, the Turkish economist.
“This might lead to a global stagflation, an undesired situation when prices continue to stay high due to rising energy costs alongside an economic stagnation, leaving the world to face a bad financial scenario,” he says.
As a result, China, the world’s second-largest economy, which has a strong interest in avoiding such a scenario, is likely to be more insistent than any other country on reaching a settlement between Iran and the United States, with the aim of ensuring the continued flow of oil through the Strait of Hormuz, the economist adds.