Concerns about the global economic impact of the Israel-Iran war, which has been raging since last Friday night, have begun to grow. Now the energy market and the aviation sector have been affected. The price of crude oil has increased by more than 11 percent and reached 75.32 dollars per barrel. Experts have warned that it will reach 120 dollars per barrel if the war continues.

From an economic point of view, countries have become cautious, especially regarding the Gulf of Hormuz. Iran has warned that this sea route will be closed. If that happens, the world energy market will be badly affected. It can be estimated that its effects will reach even Nepal. Because India imports 85 percent of its crude oil through the narrow sea route in the Gulf of Hormuz. If that route is closed, the price of oil will skyrocket. Due to the US sanctions on Iran, India does not buy oil directly from Iran. However, Iran has been an important player in the global oil market.  

The fear of closing the Strait of Hormuz

The Strait of Hormuz, which connects the Persian Gulf and the Arabian Sea between Iran in the north and Oman and the United Arab Emirates in the south, is an important sea route for international trade and shipping. It is considered as the biggest checkpoint of crude oil trade. According to the US Energy Information Administration (EIA), about 20 percent of the world's oil and 20 percent of liquefied natural gas are transported through this narrow passage. Every day, about 20.9 million barrels of oil and related products go to different places in the world, including India, China, Japan, South Korea, through this route.

Iran has threatened to close this route after Israel attacked its military and nuclear facilities. Since the oil of major oil producing countries like Saudi Arabia, Iraq, Kuwait, Qatar is exported from here, any disruption in this may cause problems in the global oil supply. Due to this, experts warn that the price of oil may touch the sky. According to JP Morgan's analysis, if the Strait of Hormuz is closed, the price of oil may reach $120 per barrel.   

Spending on the war

According to the international media, until the fourth day of the war on Tuesday, it is estimated that Israel is spending about 725 million US dollars (about 95 billion rupees) per day for the attack. Israel had spent 1.45 billion dollars in the first two days of the Ansar War, according to former economic advisor and reserve Brigadier General Reem Aminakh. Of that, $593 million was spent on offensive expenses and the remaining amount was spent on defense and reserve military deployment. 

Due to the ongoing war, the Ministry of Finance of Israel has reduced the economic growth rate of 2025 from 4.3 percent to 3.6 percent. The budget deficit limit for the current financial year has been set at 4.9 percent of the gross domestic product (GDP) or about 27.6 billion dollars. Although emergency resources are managed in Israel's annual budget, most of those resources have been spent due to the war in Gaza, the Economic Times wrote citing Wynet News. It is mentioned in the news that the emergency resources allocated in the Israeli budget for the current war with Iran are not sufficient.

Impact on energy supply

There are indications that this war will affect the energy supply system of the Middle East region. After the Israeli attack, the price of Brent crude oil reached 74.60 dollars per barrel. This is an increase of about 7 percent compared to the past. It is said that the price of oil may reach more than 100 dollars due to the increased risk of closing the Strait of Hormuz, which supplies nearly one-third of the world's marine oil. However, it is not easy for Iran to close the Gulf of Hormuz because it will also hinder Iran's exports. This route is important for Iran especially to export oil, iron, plastic, chemicals to China.   

However, experts are pointing out that if the price of oil increases due to the war, the price of energy, food and consumer goods may increase worldwide. This will increase the pressure on global inflation. Similarly, due to the war, the capital markets of the world have also been affected. There has been a decline in the indices of America, Europe and the Middle East.  There has been an increase in the share prices of defense and energy companies. The price of gold has increased. Investors have started shifting investments to alternative sectors, including gold, which is considered relatively safe. The airline sector has been equally affected. Major airlines including Emirates, Etihad, Qatar Airways have suspended flights to Iran, Iraq, Lebanon and Jordan. Iran, Iraq and Jordan closing their airspace has affected the flight routes between Europe and Asia.

stalled market

As the conflict continues, a large number of people have started leaving Tehran, the capital of Iran. This city with a population of about one million is one of the largest cities in the Middle East. According to the news of AP, the city has started to look deserted since Tuesday morning. Most of the shops are closed and the historic Grand Bazaar is also seen to be at a standstill.