Photo by Engin Akyurt
As tensions continue to rise in the Middle East involving Israel and the potential spread of conflict with Hezbollah and Iran, there are significant implications for the global economy. The impact could trickle down and hurt your wallet.
Here are five ways a new U.S. war to protect Israel could affect your financial situation.
One of the most immediate impacts of a conflict in the Middle East is the rise in gas prices. After all, it’s the region we get a large part of our oil supply. Throughout history, conflicts have resulted in a surge in oil prices, meaning higher costs for consumers at the gas pump. Take the Arab oil embargo of 1973 due to a secret deal among Arab governments as a retaliation against U.S. support for Israel. The event quadrupled oil prices in the U.S. overnight, The Conversation reported.
Wars and conflicts can disrupt shipping schedules, affecting food and agricultural production, which most often leads to higher inflation, CNN reported. Now we’re facing simultaneous wars–in Ukraine and not in Israel.
The U.S. is already burdened with significant debt, with wars in Iraq and Afghanistan alone costing over $8 trillion, according to Brown University. If inflation persists and these new conflicts cause financial strain, this will affect the quality of life for future generations. This financial strain can jeopardize social programs like Social Security or Medicaid due to governmental budget constraints.
According to the latest annual report from the Treasury Department, the trust funds supporting Social Security benefits, vital for around 67 million Americans, are projected to run dry by 2034, CNBC reported
Intensified conflict could strain the U.S. military, potentially causing the country to reinstate the draft. And throughout history, drafts tend to have a negative financial impact on families, according to the Mises Institute.
The Selective Service System, also known as the military draft or conscription, requires almost all male U.S. citizens and immigrants, ages 18 through 25, to register with the government. During a draft, eligible candidates must register; if they don’t, it is a felony, according to Military.com. Drafts tend to take the breadwinners out of the household, leaving families at financial risk.
Global conflicts cause uncertainty and can disrupt international economic cooperation, trade, and travel. Although defense contractors and oil companies tend to benefit from conflicts, the overall stock market and global economy can face instability and downturns.
“Economies are at a delicate state,” Ajay Banga, the World Bank president, told The New York Times in an interview on the sidelines of the annual meetings.
“Having war is really not helpful for central banks who are finally trying to find their way to a soft landing,” he said. “But if this were to spread in any way, then it becomes dangerous” and leave the world economy in “a crisis of unimaginable proportion.”
Photo by Engin Akyurt: https://www.pexels.com/photo/gas-pump-nozzle-filling-the-white-car-12377482/
