Historically, supply chain disruptions, potential shortages, spiking inflation and stock market plunges have been the kinds of things that the US has inflicted on its enemies. However, the economic fallout of the US and its sidekick, or boss, depending on who you believe, Israel’s illegal attack on Iran, shows that it is becoming quite costly to be a friend of Uncle Sam. The ongoing conflict is taking place in a region that ships a very large chunk of the world’s oil and gas and has, in recent decades, become a hub of travel and investment. But travel and investment do not like missiles and drones flying back and forth and nor do oil tankers. The closure of the Strait of Hormuz, through which 20 per cent of the global petroleum liquids consumption flows, has guaranteed that the world will suffer for the US-Israel war. Already, stocks have fallen and oil has spiked across the globe. Analysts warn that the resulting surge in energy prices will impact emerging markets like Pakistan well beyond inflation to broader pressures on external balances, currencies and capital flows. While the local oil and gas authorities have quelled concerns of a fuel shortage, the fact that the All Pakistan Petrol Pump Owners Association (APPPOA) accused oil marketing companies of imposing a quota on petroleum products shows the kind of confusion that can spread during periods of regional instability.
While Pakistan might not be in immediate trouble, things could change quickly if the war drags on, which it shows every sign of doing. A country where inflation is already at seven per cent, the trade deficit has widened by 25 per cent in eight months and that is currently navigating yet another IMF review, does not exactly have a lot of economic elbow room. But the broader point here is how this utterly avoidable economic shock redraws the geo-economic calculus vis-a-vis the US. Over the past three years or so, the US has funded and armed a genocide, stymied attempts to stop said genocide, illegally attacked other countries and even kidnapped the head of state of another country. It is now, once again, illegally attacking Iran. So why does the world keep putting up with the empire? One of the main justifications offered whenever this question is posed is that it is necessary for economic survival and, to be fair, there is much truth to this. The dollar is not as mighty as it once was and there are now other avenues for investment, trade and jobs, especially with the rise of China. That being said, even today, the dollar’s share of international payments ranges from about 50 to 60 per cent, and there is simply no other currency like it. However, if one is to be brought to the verge of economic catastrophe even while playing nice, then what is the point?
The countries that have decided to take on the Israel-US nexus might chalk up the economic consequences as the price of resistance. But what about allies? What is the UK to do about the fact that it might miss its inflation target should energy prices keep rising or the EU about how it might be facing yet another energy crisis, after already enduring one courtesy of the Ukraine-Russia war, another conflict arguably triggered by US adventurism. Is this simply the price of American friendship now?
