War in the Middle East: Oil pandemic drives prices and flights into the abyss!

War in the Middle East: Oil pandemic drives prices and flights into the abyss!

On Friday night, Israel carried out military actions against Iran, which led to a significant increase in oil prices. Loud South German newspaper the markets are reacting to the escalating fighting that will continue into the weekend. Oil prices rose almost 15 percent at one point on Friday, with Brent oil closing at $75.18 a barrel and WTI at $73.18 a barrel — the highest prices in months.

The situation is particularly tense as Iran is a major exporter of crude oil and, thanks to increasing threats in the region, both oil production and exports could be affected. The Association of German Shipowners (VDR) sees serious risks for trade, especially in important maritime trade routes such as the Strait of Hormuz, the Red Sea and Bab al-Mandab. These waterways are crucial for global oil traffic.

Consequences for international trade

The Houthi militia has already begun attacking ships, forcing shipping companies to avoid dangerous sea routes and instead take longer detours. As a result, shipping company stocks are rising while airlines are under selling pressure. Many airlines are having to reroute or cancel their flights as airspace over Israel, Iraq and Jordan is closed, and Ben Gurion Airport in Israel remains closed until further notice. Lufthansa has already suspended all flights to and from Tel Aviv and Tehran.

In addition to uncertainty in the aviation industry, the tourism industry is also being hit hard. The German Travel Association (DRV) is in close contact with the Federal Foreign Office to inform travelers about the security situation and possible impacts.

Economic implications

The economic consequences of these conflicts are significant. Analysts warn that a continued escalation could severely impact global energy markets and trade routes. As in DW reports, a disruption in oil exports could have global impacts, increasing consumer prices by about 0.4 percent and further destabilizing financial markets. Additionally, Iran is the Middle East's third-largest oil producer, despite international sanctions, and a prolonged conflict could further strain the Iranian economy, which is already suffering from a crisis.

The Israeli economy is also particularly affected, as the costs of a prolonged conflict could be as high as $120 billion, or 20 percent of gross domestic product. At the same time, experts warn of increasing inflationary trends, which have already risen to around 40 percent in Iran. The global economy faces uncertain times as political and military tensions continue to rise in the Middle East.