The sweeping attacks by Israel, which began early Friday, have killed more than 70 people, including four of Iran’s top security chiefs, and damaged Iran’s main nuclear site at Natanz. Iran retaliated by launching scores of missiles at Israel. At least three people have been killed and dozens more wounded during these attacks.
Israel pressed on Saturday with its campaign against Iran’s nuclear sites and military leaders. Iran in turn has launched barrages of ballistic missiles and drones, with neither side showing any inclination to end the fighting despite international calls for de-escalation.
Global Effect of War:
Oil Price Spike: The international oil market has reacted sharply to this latest West Asian conflict, jumping by over nine per cent Friday after Israel’s first two rounds of missile attacks.
Brent crude prices surged by over $6 to cross a five-month high of $78 per barrel.
According to a report by Emkay Global, Iran produces around 3.3 million barrels per day (mbpd) of crude oil (i.e., around three per cent of global production) and exports around 1.5 mbpd, with China being the main importer (80 per cent), followed by Turkey.
Airspace Closure: After Israel’s attack Friday, a timelapse video from flight-tracking website Flightradar24 showed the immediate impact on the commercial aviation industry.There were almost zero planes over Iran, with streams of passenger jets from Europe to Asia skirting around either side of the country. In fact, live visuals from the hours after the attack showed aircraft rerouting in real-time, turning out of Iranian skies for other corridors
Aviation Route Disruptions: The mass diversions, and the avoidance of Iranian airspace since, will likely have a ripple effect on international aviation, with longer flights, potential delays and increased fuel costs for multiple carriers operating in and out of West Asia and further east.
As an example, an Air India Mumbai-London flight returned after three hours in the air. Air India said the situation in Iran and the closure of its airspace had led to the flight returning to origin. Air India also said over a dozen of its flights alone had been either diverted or returned. Both countries have declared a lockdown of their airspaces.
Multiple War Fronts: Nations across West Asia have called on all sides to stand down; Saudi Arabia’s Foreign Ministry said Tel Aviv’s attacks were a “clear violation of international laws and norms”.
Missiles, though, continue to be fired by both sides and the fallout is affecting neighbouring countries. Israel-intercepted Iranian missiles, for example, have exploded in southern Syria and Jordanian jets have been scrambled to deal with similar issues over their skies.
If this conflict escalates it could even force the Americans to become involved, more directly than they already are; unnamed US officials have said they helped intercept Iranian missiles.
How will the war affect the oil market?
Brent crude, the international oil benchmark, jumped as much as 12.5 per cent in early trading on Friday, the biggest one day jump since Russia’s full-scale invasion of Ukraine three years ago. But gains have tempered slightly as the trading session has advanced, with Brent last up 8 per cent to around $74 a barrel. Oil is likely to carry an additional fear premium until the situation becomes clearer. The big concerns will be a significant loss of supplies through Hormuz or an attack on Saudi Arabia, though the kingdom was quick to condemn Israel’s attack.
War Effect on Indian Economy
The Israel-Iran conflict’s economic impact on India is under watch. Officials believe major impact is unlikely unless the conflict escalates. Short-term volatility in oil prices, capital flows, and shipping is possible. India’s strong macroeconomic position should help it weather the crisis. Indian stocks fell, and the rupee depreciated amid investor concerns. Oil prices initially spiked but later stabilized.