Wars bring catastrophic destruction for the losing countries. Even the victorious one have to sustain heavy loss. This is nothing new. History has always teach us the same and humans repeat it all the times.
Present Iran war is not only harmful for Iran but it is also harming economy of those countries which are not engaged in this war. This has become very evident in the present world system which is based on open economy where every country is dependent on other for many things. For example, countries like India are suffering from the heat of this war in many ways. Let us discuss these points:
Oil dependency: India is not a producer of petroleum. In fact, India is dependent on countries from Middle East, US and Russia for crude oil, gas and other petroleum products. Supply of crude oil through Hormuz straight had disrupted. This has a bin impact on India. Indian households and industries facing acute shortage of natural and LP gases. Many restaurants and canteens have been closed due to shortage of gases for cooking. Industries also needs gas for various processes. So, they are also facing difficulties.
Petroleum products are also used in many industries. This is very harmful for the industries.
India imports crude etc. but crude price is very high now. So, India has to pay more USD to buy the same amount of crude. This has weekend INR significantly. It will increase trade deficit of India. A perpetual cycle may start due to this: High price of crude means more payment in USD, weakening INR, weak INR means more demand of USD which means more decrease in value of INR and so on.
Week INR means more trade deficit and more to pay for loans in USD. It will put a big burden on the government and industries.
Weak industrial demand, disruption in supply chain means loss to the industries and job cuts, leading to recession.
High oil price is also pushing prices up, leading to inflation.
So, in one hand we would have a state of high inflation added with recession that is very dangerous for the economy. This war is not only harming countries of Middle East but also harming countries like India who are not engaged in the war. Indian GDP may fall 1-2% that is very catastrophic.
