Israel’s war with Hamas in the Gaza Strip may hit the world’s economy if it spirals into a broader conflict, Tom Luongo, financial and geopolitical analyst, told Sputnik.
Market indicators suggest the impact of the Israeli-Hamas conflict has remained contained so far, but the situation may change if Tel Aviv’s ground operation in Gaza goes wrong and Iran steps in.
Last Saturday’s surprise attack by Hamas, Palestinian Islamic Jihad (PIJ), and other Gaza militants as well as Israel’s retaliatory strikes have taken a toll on the economies of the region.
The shekel, Israel’s currency, has lost 3% against the US dollar, while the nation’s benchmark stock index has slumped 6.4% this week. Bonds issued by Palestine’s neighbors – Lebanon, Jordan and Egypt – have been hit hard as well.
“The war economy always looks good in the short term as production numbers go up, but that’s at the expense of the government’s balance sheet,” Tom Luongo, financial and geopolitical analyst, told Sputnik. “On the day after the attack Israel had to spend a large part of their foreign exchange reserves to defend the shekel. That will continue. Production numbers up, alongside inflation and the private economy will be diverted to the war effort if Israel follows through on the threats they’ve made to date.”