War with Iran: These countries are set to suffer the most - Reuters
Illustrative photo: some countries will feel the economic hit first (Getty Images)
The war with Iran is hitting the global economy: energy prices are rising, and the most vulnerable countries are already feeling the impact. Some nations, however, are expected to suffer more than others, according to Reuters.
Read also: Oil blockade and Israel tensions: Why Trump can't claim 'victory' over Iran
Europe caught in an energy trap again
For Europe, the latest shock recalls 2022 — the Russian invasion of Ukraine and a spike in double-digit inflation.
Countries facing the hardest impact:
- Germany – a major industrial economy paying high energy costs. The manufacturing sector has just emerged from a recession, but a global downturn could hit it again.
- Italy – large industrial sector and heavy reliance on oil and gas in its energy mix.
- United Kingdom – electricity here depends on gas more than other G7 countries. Gas prices are rising faster than oil. Budget constraints limit support for businesses and citizens.
- Japan – imports about 95% of its oil from the Middle East, nearly 90% of which passes through the Strait of Hormuz. The local currency has weakened, pushing up food prices rapidly.
Large developing countries
India – imports about 90% of crude oil, half of it via the Strait of Hormuz. Growth forecasts are already downgraded, and the rupee has hit record lows.
Turkey – borders Iran and is preparing for a potential influx of refugees. The central bank has halted interest rate cuts and spent up to $23 billion from reserves to support the lira.
Persian Gulf states – Kuwait, Qatar, Bahrain – may struggle to export oil and gas if the Strait of Hormuz remains closed. Some analysts already predict economic contraction in the region this year.
Countries on the edge
Some nations are particularly vulnerable, having already faced or barely survived economic crises:
- Sri Lanka – government offices close on Wednesdays to save fuel, operating a fuel rationing system.
- Pakistan – two years ago teetered on the brink of crisis. Government fuel limits for agencies were cut in half, and new air conditioners are banned.
- Egypt – declining revenues from the Suez Canal and tourism (about $20 billion annually). The currency has dropped nearly 9% since the war began, and most debt is in dollars.
Iraq has declared force majeure due to the blockade of the Strait of Hormuz. Production by the state-run Basra Oil Company has fallen from 3.3 million to just 900,000 barrels per day, only for domestic refineries. This is critical for Iraq, as oil revenues account for over 90% of the national budget.
Meanwhile, US President Trump stated that the United States does not need the Strait of Hormuz. He believes that free navigation there is more important for Europe, Japan, China, and other countries.
