The Middle East On Fire

Rising tensions between Israel and Iran are intensifying the Middle East war, threatening global peace, oil supply, economic stability and geopolitical balance

Suresh Chandra Sarangi

Three things are intertwined in the Middle East war, and now Israel and Iran are embroiled in a holocaust, having historical roots, contemporary actors, and regional geopolitical dynamics. The intertwined dimensions of a regional conflict may be taking the shape of a great world war. West Asia is in ferment, and the fragility of peace is marked by geopolitical volatility and escalating regional tensions. The regional dynamics are flaring up, and much is at stake in this ugly, unprovoked war. It has set the Middle East aflame, and politicians are at their wits’ end to find a solution to this continuing war. After the creation of Israel, the struggle for the homeland for the Palestinians and the Gaza crisis, the geopolitics is complex in nature, with alliances, armed race, and it is difficult to decipher the layers of the multidimensional conflict and the trust deficit.

The recent origin goes back to Gaza, and the violent conflicts between the Israeli and Hamas have escalated into a broader area, disturbing world peace and throwing all cannons of international understanding into the wind. Gaza remained the epicentre of this war. The historians say it’s all about identities and policies of both Iran and Israel. The conflict surrounding Gaza addresses the fundamental question of the viability of a peaceful resolution, in the backdrop of deeply rooted mistrust, and many irreconcilable demands, and the actors do not agree to international understanding, which may explode into a potential world war. The involvement of Iran and its various proxies, like that of Hezbollah in Lebanon, Shia militants in Syria and Iraq, to the Houthis in Yemen, has instilled the Gaza war into a broader military confrontation.

Tehran’s supply of weapons, training to militants, and financial support to Hamas, and at the other end, the Palestinian Islamic Jihad, have somehow involved many splinter groups, and as the war intensifies and engulfes the entire region, with involvement of the US, it makes the issue more crucial. The original issue of Israeli security and the Palestinian homeland has now been transformed into a global war in offing. The existential threat in the Middle East has been more violent than ever before, with war casualties mounting. Israel, supported by the US, has become more belligerent to maintain its territorial integrity and sovereignty. The shadow war after Iran’s King Shah’s ouster in the 1979 Islamic Revolution, the politics of fundamentalism have been more profound. The causes of escalations are too many, but primarily, it remains that the Israelis are concerned about the machinations of Iran, which is building a “chain around the neck of Israel, known as “ring of fire.”

Israel’s apprehension is emanating from Iran’s programme for a nuclear state, its progressing Uranium enrichment, the development of ballistic missiles capable of carrying nuclear warheads, and the failure of international organisations to broker a permanent peace. The revenge of geography has been terrible. Countless lives have seen their darkness at noon with heavy human casualties, destruction of assets, bringing oil into boil. The death of the supreme religious authority and head of Iran after the murderous killing by Israel has rendered the war more intense between the two nations. The dispute with Iran is not about Territory, but about regional hegemony, ideological influence, and nuclear proliferation. Iran’s desire is to weaken Israel and delegitimize its territorial space. The implications are huge. Though the Gaza war was intended to search for a permanent solution to the Israeli – Palestinian conflict, it has snowballed, with American support for Israel, into a towering inferno in the Middle East, throwing the supply chain into disarray.

A broader analysis brings forth a large number of issues involved, and then the stakes, which are crucial for world peace. The US supports Israel, and this makes the geopolitics more pronounced, widespread, and any peaceful resolution totally defeated ,though there have been attempts with US mediation during the Camp David settlement and subsequently, a peace plan brokered by President Obama. The truce is short-lived and now in limbo, and a belligerent Trump wants to finish the Uranium enrichment programme and thwart the attainment of the status of a nuclear power. On the other side of the wall are China, Russia, North Korea, and the Cold War is reignited and in full-fledged glare of the world.

The war benefits a select few, arms many, and remains dragged for a longer period ,bringing in geopolitical instability, putting pressure on currency, stoking inflation, and the protracted war threatens world peace to its core and undermines the importance of international institutions and their efficacy as a world body to bring peace and stability. Even the condemnation of the UN Secretary General of the killing of the Iranian leader has not yielded any result or put any pressure on the US to bring a stop to the armed escalation with its intervention. Russia is in full support of Iran. China threatens it may not send rare Earth metals to the US.

Iran’s attack on the American bases in Saudi Arabia, Dubai, and other places clearly speaks that the war is amongst nations in West Asia. The operation Epic Fury and Roaring Lion have killed the Iranian supreme leader and brought more retaliation by Iran against Israel. The strikes are more lethal now. Iran has closed the Strait of Hormuz, thereby paralysing the supply chain. As about 20% of the world’s crude oil passes through the Strait of Hormuz, it is a big challenge in terms of the flow of oil, thereby exacerbating the fear of energy security and stoking inflation. There is elevated uncertainty, inflation spiral, supply chain disruption, weakening of business sentiment and elevated uncertainty, and all these ramifications may bring a halt to the global economy, with globalization taking a serious halt.

The world Capital market is tumbling like never before. With oil fields on fire, the global oil market has experienced maximum volatility with an upward trend in prices. Of course, geopolitical conflict has renewed interest in US treasury bonds, and gold has again received attention for buying as gold being considered as safeheaven due to geopolitical turbulence. The 10 year yield of bonds has surpassed 4%. Central banks, of course, are moving away from treasuries and investing in gold. Financial markets are unsettled and exhibiting nervousness, with investors’ appetite for investment being frozen.

The macroeconomic impact analysis of geopolitical conflict and its impact on oil and gold is rattling the world market. In India, gas price per cylinder has gone up by Rs 60. Oil prices have surged 8 to 13%, and Airlines are suffering as Quasar has already spoken to take oil 135 dollar per barrel. Airlines are suffering as the Middle East Airports are closed. Gold has exploded past 5000 to 5400 dollars. Hedge funds and central banks rush into the traditional safe-haven asset in view of uncertainty and rising inflation fears. The 1970 73 oil crisis looms large on the horizon. The IMF had already predicted tough times for the world economy going ahead.

The sharp increase in oil prices will directly affect the cost of production. Some economists are of the opinion that there is a likelihood of stagflation like situation. There is increased unemployment risk, and the poor labour classes are suffering in the Gulf countries. The combined result would be rising consumer prices, falling GDP, and the central bank would have a difficult time balancing inflation control and economic growth. On Monday, the world market faced serious consequences.

The Israeli attack started after one day of our PM’s tour of Israel. Critics say the visit was Ill- timed. The torpedoing of Iran’s ship near Srilanka, by Israel and US brings fourth the question, is the Indian Ocean safe? Is Quad dissolved? A matter of introspection for India. India’s oil reserve is depleting. When Russia extends a hand, the US has agreed to the purchase of Russian crude by India. It is high time to choose alternative energy solutions. India, so far, has maintained its strategic autonomy, condemned the killing of the Iranian leader, and steers clear of two extremes. Dark clouds are gathering on the horizon. A question in each one’s mind: will it transform into a Third World War? A million-dollar question, of course. The world is grasping for breath right now, and an end to war shall be in the interest of the green planet.

(The writer is a former General Manager of Bank of India. Views expressed are personal.)