NEW YORK – Recently, the U.S. and Israel engaged in military action against Iran, leading many to predict severe consequences like skyrocketing oil prices and a worldwide recession. However, six months into the conflict, while the global economy has certainly felt the effects, it hasn’t spiraled into the worst-case scenarios that some anticipated.
According to Michael Ashley Schulman, an investment strategist from Cerity Partners, the global economy has managed to navigate these challenges remarkably well, almost as if it accomplished a “Mission Impossible” feat.
Let’s break down how the war has affected different sectors of the economy, highlighting the winners and losers:
Winner: Investors Who Stayed Calm
During the initial chaos of the conflict, stock markets experienced a significant downturn due to uncertainty. Oil prices surged, and major stock indexes like the Dow and Nasdaq fell into correction territory, marking one of their worst months in years.
However, since bottoming out in late March, the markets have rebounded impressively. The Dow has risen nearly 19%, the S&P 500 is up about 22%, and the Nasdaq has surged by 27%. If these trends continue, all three indexes could achieve their fourth consecutive year of gains.
The International Monetary Fund noted that while the war has strained economic growth, a rise in enthusiasm for artificial intelligence has provided a counterbalance.
Loser: Travelers and Commuters
One of the most immediate impacts of the conflict has been on oil prices. With shipping through the Strait of Hormuz disrupted, Brent crude oil prices soared from about $72 a barrel to nearly $120. Although prices have slightly decreased, they remain about 20% higher than before the conflict.
This spike in oil prices has significantly affected travel costs. Airlines have raised ticket prices and added fuel surcharges, leading to a reduction in flight availability. For instance, Lufthansa Group has cut 20,000 short-haul flights, and Spirit Airlines has struggled to stay afloat.
According to Brett House, an economist at Columbia University, there’s little hope for a decrease in airfares soon, as competition among airlines remains low.
Winner: The Clean Energy Sector
The disruption in oil supply has invigorated the clean energy movement. With rising fuel prices, many consumers are turning to electric vehicles (EVs). In Singapore, the growth rate for EV sales has reached an astonishing 110% year-over-year, while New Zealand and Colombia have seen increases of 180% and 300%, respectively.
The International Energy Agency anticipates that EVs will make up 29% of total vehicle sales by 2026, up from 25% last year. Countries reliant on Persian Gulf oil are also accelerating their investments in renewable energy and exploring nuclear power options.
Loser: The Battle Against Hunger
While the wealthy may barely notice the economic impacts of the war, the poorest populations are struggling significantly. Fertilizer prices skyrocketed, peaking at 44% higher than pre-war levels, which poses a serious threat to food production.
Many farmers are reducing fertilizer use, risking future harvests. The United Nations World Food Programme has warned that millions could face hunger as a result of these soaring costs. “An oil tanker anchored in the Strait of Hormuz can mean one less meal a day for a child in Sudan,” said Carl Skau, acting executive director of the WFP.
Winner: The Trump Family’s Businesses
Despite the war’s heavy toll on the U.S. and Iranian economies, the Trump family has seen financial benefits. Powerus, a military contractor linked to Eric and Donald Trump Jr., secured a significant contract to supply interceptors for U.S. military operations against Iran.
Additionally, Trump’s investment portfolio has benefited from military stocks, including Lockheed Martin and Northrop Grumman, reportedly increasing his wealth by about $15.5 million.
As the conflict continues, it remains to be seen how these dynamics will play out politically, especially as midterm elections approach.
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Contributing to this report were Associated Press reporters Mae Anderson, Cathy Bussewitz and Bernard Condon in New York; Paul Wiseman in Washington; Wyatte Grantham-Philips in Chicago; Rio Yamat in Las Vegas; Alexa St. John in Detroit; Allan Olingo in Nairobi, Kenya; Chan Ho-him in Hong Kong; and Anton L. Delgado in Bangkok.
