The Gaza war has deteriorated with the attacks and counterattacks in the Red Sea, one of the world’s busiest trade routes used for a globally significant portion of grain, liquefied natural gas, consumer goods and other trades, and increased the chance of further devastating impacts. According to multiple newspapers, including the BBC, the war has already killed more than twenty five thousand, mostly Palestinians, along with a devastating humanitarian crisis. Additionally, the economic impacts of the Gaza war — which has destroyed or damaged at least 60 percent of housing units, more than 350 educational facilities and many other facilities of the Gaza Strip and affected trade through the Red Sea — are enormous.
The war has by this time impacted the economy regionally. The economic activities of Israelis and Palestinians are now stopped in Gaza. Though the war has not notably increased oil prices and its regional and global economic impacts have not yet become much, it has brought notable economic impacts on several other countries, including Egypt, Jordan and Lebanon. Given that the war does not end soon, its economic impacts will be significant with the possibility of further affecting trades through the Red Sea, impacting tourism, more displacement and a higher number of refugees and reducing investment. A UNDP-commissioned assessment, according to multiple newspapers, indicates that the economic cost of the war on Arab neighbors, especially Lebanon, Egypt and Jordan, may rise to at least $10 billion this year.
Optimistically saying, the war has not yet escalated into the region as was worried. But the chance of its escalation remains because of several causes, including the absence of efforts to end the war and geopolitics. Attacks and counterattacks have increased in different areas of the region including Iraq, Syria, the Red Sea and Yemen. But there is no optimistic progress on ending the war. Given that there is an escalation of it involving other neighboring countries, the economic impacts will definitely be enormous — both regionally and globally — with the possibility of the displacement of millions, disrupting economic activities in several other countries, impacting the oil price, disrupting trades and rising inflation.
It is often difficult to effectively prevent negative economic impacts during the war driven by several causes, including the difficulty in maintaining supply chains, the destruction of infrastructure, the displacement of people and the necessity of diverting resources away from productive sectors towards military efforts. But effective steps often help reduce the economic impacts of wars, depending on the scale and parties of the war and several other reasons. To reduce the negative economic impacts of the Gaza war on the economy, a combination of steps, including ending attacks on civilian areas in Gaza, the continuation of trade (including international trade) and seeking diplomatic solutions, is crucial.
While the military step can help secure the Red Sea trading route, it remains uncertain and has a high potential for war escalation. The emphasis on diplomatic steps may be helpful in securing the trading route and ending attacks on civilian areas. Since the longer war itself will increase the chance of regional escalation and devastating impacts, including economic impacts, its ending is imperative. The call of the US president for a two-state solution is definitely relevant and praiseworthy and can end the war — along with resolving the Israel-Palestine crisis. The good intentions of the parties, including Israel and Houthis, are desirable.
Amir M Sayem
Chief Editor
Dhaka Opinion Magazine
