LETTER | The recent escalation of tensions between Iran and Israel has raised concerns about the stability of the region as well as the potential effects on the world economy.
Concerns on how the conflict may affect international trade, the flow of raw materials, and corporate operations are mounting as it plays out.
One of the immediate concerns is the disruption of trade routes in the region.
Iran and Israel share a strategic location near important shipping routes, especially in the Eastern Mediterranean and Persian Gulf.
The transportation of products, services, and energy supplies to and from important markets could be impacted by the shutdown or increased risk of these crucial waterways or even airways resulting from conflict in these areas.
As a result, supply chain disruptions, higher costs, and delays in global trade flows might affect a variety of businesses, including retail and manufacturing.
The flow of resources from major Asian markets like China to Western nations, or vice versa, would probably also have noticeable effects.
This is one probable outcome of the disruption in oil prices brought on by the capacity to strike oil ships and the world’s energy supplies.
The volatility in the region could lead to uncertainty in commodity markets, particularly oil and gas.
Iran is a significant oil producer and any interruption to its production or exports might cause tremors in the world’s energy markets.
Likewise, Israel’s close vicinity to important energy transit routes, such as the Suez Canal, may give rise to questions regarding the security and stability of supplies of gas and oil across the area.
Businesses that depend on stable energy prices for their operations may be impacted by price spikes and higher risk because of this uncertainty.
Furthermore, the conflict may have broader implications for global business sentiment and investor confidence.
Increased geopolitical tensions frequently cause market volatility and investor risk aversion. This might reduce consumer spending and investment activity, especially in areas where the conflict is already felt.
Furthermore, companies that operate or have interests in the Middle East may be more vulnerable to supply chain interruptions, increased insurance costs, and greater security threats, all of which might negatively affect their bottom line and chances for long-term growth.
Being a commercial country, Malaysia could also be affected since the country is heavily dependent on international supply chains. Important imports and exports may be delayed or reduced if trade routes are disrupted, especially those that run via the impacted areas.
This may affect a number of Malaysian businesses that depend on imported components and raw materials for production.
To lessen the effects of the conflict, businesses may need to re-evaluate their risk management plans, diversify their supply chains, and look into other trading avenues in reaction to these difficulties.
It is imperative that governments and international organisations engage in conversation and diplomatic solutions to avert additional instability and lessen the economic consequences of the conflict.
The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.
