Israel’s subsequent bombardment of Gaza in a bid to eliminate Hamas has increased the risk of a spillover to the wider Middle East region.
The events in recent days have deepened the greatest fear among economists, that the conflict engulfs the region and begins to pose a long-term threat to global energy and trade infrastructure.
Israeli President Isaac Herzog said Tuesday that while Israel does not want a war with Lebanese militant group Hezbollah, which has recently exchanged fire with Israeli armed forces in the north of the country, Lebanon will"pay the price" if the two countries end up in a full-scale altercation. "For economies that are already in or heading for recession, further hikes from the Fed and the ECB could tip them over the edge," Thaker told CNBC via videolink.
The Middle East is home to the world's busiest shipping routes, including the Suez Canal, the Red Sea, the Persian Gulf and the Strait of Hormuz, heightening the economic peril associated with escalation. "So when you start to think about which countries could be more vulnerable to higher energy prices and sustained higher energy prices, you have to start looking at net energy importers with high energy contributions to the CPI basket, and countries like Chile are there, Turkey is there, several Asian economies like Thailand, the Philippines, India, are there."
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