The geopolitical landscape of the world has undergone significant and quick changes in the past few decades. In recent years, significant events have unfolded, inclu

The geopolitical landscape of the world has undergone significant and quick changes in the past few decades. In recent years, significant events have unfolded, including the Russia-Ukraine conflict, the US-China trade war, the Brexit, and the onset of the Covid-19 pandemic. The aforementioned events have significantly influenced the current state of world affairs and have the potential to impact global supply chains and disrupt the previously stabilizing dynamics following the Russia-Ukraine Conflict.

The Conflict and the Geopolitical and Supply Chain

The recent struggle between Hamas, an armed group in Palestine, and Israel has had a significant impact on the geopolitical situation in the Middle East in the long term. In a surprising turn of events on October 7, 2023, the Palestinian militant organization Hamas initiated an assault on Israel. In response, Israel swiftly retaliated by conducting airstrikes and implementing a comprehensive blockade. The conflict has not only changed the geopolitical landscape, but it has also disrupted the efforts of developed and developing countries to reconfigure their supply chains. Given the current challenges of high inflation, interest rates, the ongoing Russia-Ukraine war, and a slowing Chinese economy, the world cannot afford another large-scale war. Many countries are attempting to limit any further escalation in the ongoing Israel-Hamas conflict for this very reason. Since the conflict occurred, analysts and economists have been carefully examining the track of the Middle East crisis and comparing it to past conflicts in the region to assess the probable economic consequences. The ongoing confrontation between Israel and Hamas has had a minimal influence on global commodity markets thus far. Following the Israeli-Hamas crisis, there has been a 6% increase in oil prices, although most industrial metals, agricultural commodities, and other commodities have seen minimal or no price fluctuations. Thus far, this has been the prevailing situation.  However, with the ongoing war and Israel's increasing military operations in Gaza, there has been a significant surge in gasoline prices over the past two weeks. The recent development has triggered a sense of unease among economists and policymakers, reigniting worries about the potential disruption of global supply networks and commodities markets caused by the war. Economists globally have already been formulating methods to mitigate inflation resulting from the Russia-Ukraine conflict. The incursion that has had an enduring influence on the worldwide economy, resulting in persistent disturbances up until the present time. Economists are currently conducting a thorough analysis of the Middle East crisis trajectory and making comparisons with past conflicts in the region in order to ascertain the probable magnitude of economic consequences.

The protracted conflict between Israel and Hamas is anticipated to lead to a rise in food and energy costs. A crisis of this nature has the potential to worsen economic repercussions, leading to a double blow for commodity markets worldwide, many of which are still dealing with the effects of the Russia-Ukraine Conflict. Worries about possible disruptions to pipelines causing major disruptions to global supply networks led to a substantial increase in petrol prices throughout Europe last month. The impact of the Israel-Hamas conflict and the length of elevated oil prices on inflation and the global economy will be determined by World Bank officials. The significant oil price shock will solely amplify commodities prices and heighten the prevailing concerns about inflation in food costs, particularly in poor nations that are already grappling with escalating levels of hunger.  The current Middle East crisis evokes recollections of the Arab oil embargo in 1973, during which OPEC reduced oil supplies to nations supporting Israel. At that time, it constituted 50 percent of the total oil production. Despite the increase in non-OPEC output and the lesser contribution from OPEC at 32 percent, it remains significant enough to cause an increase in oil prices. A 10 percent increase in the price of crude oil will lead to a corresponding 0.4 percentage point increase in worldwide inflation in the coming year.

Despite predictions by various analysts and comparisons to the 1973 oil crisis, where OPEC reduced oil supply to Israel's supporters, it is important to note that the current situation, although alarming, cannot be directly equated to that of the past. Over the past five decades, non-OPEC countries have significantly increased their oil production. As a result, the contribution of non-OPEC countries to global oil supply today stands at less than 32%. If the Israel-Hamas conflict escalates, policymakers in developing nations will be required to devise methods to address a potential surge in inflation and interest rates. Given the existing difficulties in the supply chain, it is advisable for businesses and their network of suppliers to contemplate the implementation of trade finance solutions that are powered by technology and provided by modern fintech companies. These solutions provide convenient access to cash at the right time and assist enterprises in gaining a competitive edge in the global trade environment. 

The conflict in the Middle East can provide clarity to the countries in the region regarding their position in the current situation and which countries they can depend on in the long term. The present circumstances are significantly different from the 1973 oil crisis, and recent technological advancements and events like the Russia-Ukraine conflict have prompted developed and developing nations to explore alternative methods for addressing supply chain issues. Middle Eastern countries can utilize this situation to establish a new position for themselves in the energy markets. 

Israel-Hamas War and the Supply-Chain disruption

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