Gaza war a threat to fragile world economy, analysts warn

According to the World Bank’s latest Commodity Markets Outlook, the conflict’s effects on global commodity markets have been limited so far. Overall oil prices have risen about 6 percent since the start of the conflict. (Reuters)
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Updated 19 November 2023

Gaza war a threat to fragile world economy, analysts warn

  • World Bank report forecasts an economic ‘shock’ could push oil prices soaring to $150 per barrel

RIYADH: In a worrying report issued on Oct. 30, the World Bank warned that the war in Gaza between Israel and Hamas could trigger an economic “shock” that would include oil prices soaring up to $150 a barrel and millions around the world going hungry due to the result of higher food prices.

Just as the world economy emerges from the disruption of the pandemic and the shockwaves of the Ukraine war, economists and risk analysts are mindful of how an escalation of the Israel-Hamas conflict into a wider regional war involving Lebanon, Syria, Iraq, and even Iran, might impact the global economic recovery and the price of commodities for rich and poor countries alike.

In its latest Commodity Markets Outlook, the World Bank stresses that while the global economy is in a much better position than it was during the 1970s to “cope” with a major oil-price shock, it did state that “an escalation of the latest conflict in the Middle East – which comes on top of disruptions caused by the Russian invasion of Ukraine – could push global commodity markets into unchartered waters.”

In 1973 members of the Organization of Arab Petroleum Exporting Countries, led by Saudi Arabia’s King Faisal, proclaimed an oil embargo of nations that had supported Israel during the Yom Kippur War. At the time, the embargo acutely strained the US economy, which had grown increasingly dependent on foreign oil under the Nixon Administration.

“At the moment, the situation is fluid,” Dr. Nasser Saidi, former Lebanese economy and trade minister and founder of Nasser Saidi & Associates, an economic and business advisory consultancy, told Arab News, adding: “The impact of the Israel-Hamas war will depend on the length and depth of the conflict as well as if it spills over into the wider region, thus drawing in other parties, resulting in international ramifications that would then have an effect on global supply chains.”

In his presentation “The Middle East in a Fragmented, Multi-Polar World” at the 19th Korea Middle East Cooperation Forum in Doha from Nov. 5-8 this year, Saidi stated how “global growth momentum has already slowed significantly this year; the war has the potential to further slow growth rates, raise already record-high public debt levels into crisis.”

According to the bank’s report, the conflict’s effects on global commodity markets have been limited so far. Overall oil prices have risen about 6 percent since the start of the conflict. Prices of agricultural commodities, most metals, and other commodities have barely budged.

“The global economic impacts of the war between Israel and Hamas have remained relatively muted,” Robert Mogielnicki, senior resident scholar at the Arab Gulf States Institute in Washington, told Arab News. 

The impact of the Israel-Hamas war will depend on the length and depth of the conflict as well as if it spills over into the wider region, thus drawing in other parties, resulting in international ramifications that would then have an effect on global supply chains.

Dr. Nasser Saidi, former Lebanese economy and trade minister and founder of Nasser Saidi & Associates

“Unless we see this conflict ignite the region, there is unlikely to be a major shock to global markets,” he added. “This war of course raises the geopolitical stakes within the region, but in many cases the impact of geopolitical developments on markets tends to be limited and short-lived.”

However, some analysts take a different view, and warn that ongoing fighting between Israel and Hamas could severely threaten the world’s already fragile economic outlook.

The war in Gaza, now in its sixth week, has resulted in the displacement of around 1.5 million Palestinians, 21 hospitals that have gone out of service and dozens more that had been severely damaged, over 11,000 deaths and tens of thousands more injured, according to the Health Ministry in Hamas-run Gaza.

“We are meeting at a very dangerous time for our part of the world,” said Saidi during his presentation in Doha. “The timing of this conference is very opportune at a personal level, and I think it reflects many of us. I have known nothing but war during my own lifetime as a professional, as a minister, as a public official, as an academic. My message is it must end and maybe what is happening today in Gaza and Palestine more generally may be a moment of change. We don’t know yet. We’re still living the fog war.”

As Saidi underlined, the Middle East is home to 60 percent of the world’s refugees – the highest number in the world.

Palestinian refugees won’t just stay in neighboring countries, they will be pushed to move to other regions, including Europe, he added.

“The impact of the war on oil and gas prices could be huge,” said Saidi, further noting that if oil prices jump to a record $150 per barrel as the World Bank warns, “it will affect world economic growth, which has already been slowing during 2023. The more inflation affects commodity prices, the lower economic growth and the increase in debt crises for many countries because you are also having a period of high interest rates.”

“Destruction and violence beget violence,” added Saidi in his presentation. “There are no military solutions in Gaza.”

The countries most vulnerable in the Middle East include Lebanon, Egypt, Jordan and Iran. These countries are already facing a decline in growth, have current account and fiscal deficits and a fall in international reserves. According to Saidi, the sectors that will be most impacted in these countries are tourism, hospitality, construction and real estate, as well as capital outflows and lower foreign direct investment inflows.

“Neighboring Middle Eastern states dealing with significant economic challenges of their own, like Egypt and Lebanon, are especially vulnerable here,” said Mogielnicki. “Any spillover of violence or refugees will immediately impact these neighboring states, which do not necessarily have the absorptive capacity.”

A lot clearly depends on oil.

“Any escalation of violence or major attacks in the oil- and gas-producing countries of the Gulf would affect energy markets in a consequential manner,” said Mogielnicki. “Thus far, key actors in the Gulf have demonstrated a strong desire to prevent this war from turning into a broader regional conflict.”

On Nov. 11, Saudi Arabia called an emergency Arab-Islamic Summit to address concerns over the humanitarian crisis in Gaza. All leaders agreed on the need for a ceasefire. The joint summit concluded by calling for an Israeli arms embargo. 


The World Bank stresses that while the global economy is in a much better position than it was during the 1970s to cope with a major oil-price shock, it did state that an escalation of the latest conflict in the Middle East could push global commodity markets into unchartered waters.

“The world is becoming increasingly fragmented,” said Saidi.

It has also experienced great economic shifts in recent years – shifts that see the global economy looking eastward rather than westward.

In 1993, the G7 countries produced close to 50 percent of the world’s gross domestic product. Today, that group accounts for 30 percent, while Asia, in particular China, produces close to 20 percent.

“The implications for this part of the world are very clear,” said Saidi. “Our economic relations, politics, defense and other ties have always been with the West, but economic geography dictates that we need to shift those relations towards Asia.”

Saidi argued in his presentation that one way to solve some of the dire economic prospects facing the Middle East, especially with the war in Gaza, is the creation of a regional development bank. The focus now needs to be on “post-war stabilization, reconstruction, recovery and a return to pre-war economic legacy.”

“The GCC (Gulf Cooperation Council) have got to be the main engine for economic stability across the Middle East because they’re capable of doing that,” said Saidi. “In order to do so, we must reinvigorate the GCC common market and the GCC customs union. We need trade agreements as a block for the GCC countries. Secondly, we need to establish an Arab bank for reconstruction and development. We are the only region in the world.”

"We are the only region in the world without a development bank," said Saidi.

When asked why the Middle East needs a development bank, Saidi said: "Because many of our countries have been destroyed."

“We need to help rebuild them. The cost is easily $1.4 to $1.6 trillion, and the list of countries is increasing. We now have Gaza and Palestine added to them.”

This, he said, could be one area for cooperation between the Middle East and Asia.

“The big tectonic shift is moving towards Asia,” added Saidi. “All our trade agreements are with Europe and the United States. That must change. We must shift.”

Emmanuel Macron joins global leaders in unveiling ambitious climate strategies at COP28 

Updated 35 min 54 sec ago

Emmanuel Macron joins global leaders in unveiling ambitious climate strategies at COP28 

DUBAI: Global leaders have stressed the need to actively identify climate challenge priorities and establishing goals on the second day of COP28 in Dubai.  

During the High-Level Segment National Statements, France’s President Emmanuel Macron underscored the urgency of phasing out fossil fuels as the world’s top priority.  

“Emerging countries must phase out carbon, which is our biggest fight. If there’s a top priority, it’s for emerging countries to phase out carbon,” he stated.  

Macron also emphasized the need to reduce oil usage and emissions in significant sectors like maritime and aviation.  

“France has developed a strategy to phase out fossil fuels and reduce emissions. Europe is fully committed to this strategy. By 2035, a high percentage of cars produced in France and Europe will operate without oil. We are also building a housing strategy to massively reduce maritime and air emissions,” Macron explained.  

Turkiye’s President Recep Tayyip Erdogan discussed his country’s modest contribution to global climate challenges and its firm strategy for supporting the global cause.  

“Our historical responsibility for global greenhouse emissions is less than 1 percent, yet we’re taking significant steps on our own,” Erdogan noted.  

“We aim to reach net-zero emissions by 2053 and have doubled our emission reduction target for 2030. We expect to have mitigated 66.6 million tons of equivalent carbon dioxide by the end of this year,” he added.  

“The share of renewables in our power generation capacity has increased to 55 percent. With this rate, Turkiye ranks fifth in Europe and twelfth in the world in terms of installed renewable energy capacity,” Erdogan stated.  

Santiago Palacios, president of Paraguay, highlighted his country’s success in climate change, noting that they now generate 100 percent clean energy.  

Kazakhstan President Kassym-Jomart Tokayev affirmed his country’s commitment to the global climate agenda, especially in the supply chain sector.  

“As a major exporter of uranium, providing 43 percent of the global supply, Kazakhstan plays a crucial role in carbon-free electricity generation worldwide,” Tokayev said.  

“As the world moves towards decarbonization, critical minerals including rare earth metals will become indispensable. Kazakhstan is poised to become a significant supplier of these transition minerals,” he concluded. 

Turkiye’s Erdogan offers to host UN climate talks in 2026

Updated 01 December 2023

Turkiye’s Erdogan offers to host UN climate talks in 2026

  • “We have announced our candidacy to host the 31st United Nations Climate Change Conference, to be held in 2026,” Erdogan said
  • “We intend to increase the proportion of renewable energy to 69 percent by 2053”

DUBAI: Turkish President Recep Tayyip offered Friday to host the United Nations COP31 climate conference in 2026.
Erdogan’s announcement at this year’s gathering in Dubai puts Turkiye in the race against Australia, which announced its candidacy earlier this year.
“We have announced our candidacy to host the 31st United Nations Climate Change Conference, to be held in 2026,” Erdogan said.
“I am certain that you, esteemed friends, will provide the essential support in this regard.”
Turkiye in 2021 became the last country among the Group of 20 major economies to ratify the Paris Climate Accords, committing itself to meet the net-zero emissions target by 2053.
The importance of environmental issues soared in Turkiye in the wake of deadly wildfires in 2021 that ravaged large parts of the country’s Aegean and Mediterranean coasts.
“In pursuit of the net-zero emission target, our decarbonization roadmaps for the steel, aluminum, cement, and fertilizer industries have been finalized,” Erdogan said.
“We intend to increase the proportion of renewable energy to 69 percent by 2053.”
Reeling from a massive earthquake that killed more than 50,000 people in February, Turkiye withdrew from hosting a key UN biodiversity meeting in 2024 in order to focus its resources on reconstruction efforts.

​​UN official urges strategic plans for climate-vulnerable nations at COP28

Updated 01 December 2023

​​UN official urges strategic plans for climate-vulnerable nations at COP28

DUBAI: In discussions about the impact of global warming, it is crucial to consider the financial capabilities and burdens – especially for vulnerable nations in recovery, a top UN official has emphasized.  

During a panel conversation on day two of the UN’s climate change conference in Dubai, the organization’s Assistant Secretary-General and Special Representative of the Secretary-General for Disaster Risk Reduction Mami Mizutori highlighted the importance of this aspect. 

The panel also featured Yoshihiro Kawai, chairman of the South East Asia Disaster Risk Insurance Facility; Ana Gonzales Pelaez, a fellow of the Cambridge Institute for Sustainability Leadership; and David Howden, CEO of Howden Group. 

Mizutori shared insights on securing the financial future of climate-vulnerable nations, drawing from personal observations during visits to these countries.  

She emphasized that the focus should shift from what they have lost to what resources they possess for development. 

“It is not about how and what they lost but when you look at it, it is about what do they have in order to develop,” said Mizutori. 

Countries like Tonga, a collection of small islands in the Pacific Ocean, are, in Mizutori’s eyes, still recovering from the COVID-19 pandemic. Additionally, they are facing environmental problems, such as floods, that hinder their financial growth and overall social development. 

The UN assistant secretary-general believes that the insurance industry plays a significant role in securing the financial future of vulnerable countries in the face of climate change. According to her, fundraisers need to first agree on how to address it adequately and design a plan that suits the given circumstances. 

She added: “The insurance industry has been the active cord of protection for vulnerable countries.” 

Furthermore, Howden shared his perspective on the subject during the panel, stating: “It is not just about providing finance for disasters or post-disaster situations but also ensuring certainty around investment.” 

He believes that funding vulnerable nations without the guarantee of maintaining sustainable investments may not be the best approach. Thus, having an insurance financial plan for each country becomes a necessity to facilitate recovery once a disaster strikes. 

World leaders address climate change achievements and challenges at COP28 

Updated 01 December 2023

World leaders address climate change achievements and challenges at COP28 

DUBAI: World leaders have spoken of the urgent need for collective action to combat climate change on the second day of the UN Climate Change Conference in Dubai. 

The UAE’s Vice President Mansour bin Zayed Al-Nahyan showcased the nation’s leadership, pledging carbon neutrality by 2050 and a substantial investment in renewables. 

He said: “We were the first to pledge to achieve carbon neutrality by 2050. We have allocated $163 billion for expansion of renewables and to transition towards renewable energies.” 

Some leaders used their speeches to broaden the focus beyond environmental matters, with Egyptian President Abdel Fattah Al-Sisi warning that political challenges occurring alongside the climate change debate are just as serious. 

Representatives from Brazil and the EU used their addresses to reinforce commitments to emission reduction, with President Lula da Silva pledging significant reductions by 2030 and European Commission President Ursula von der Leyen calling for concrete actions at COP28. 

Leaders from Kenya, Zimbabwe, Tonga, Guinea-Bissau, as well as Congo, and Mauritania, emphasized the global nature of the climate battle and the need for increased financial support to developing nations.  

The call for solidarity resonated as leaders acknowledged the ongoing challenge and the imperative to elevate environmental transformation financing. 

Innovative private sector must play its part in energy transition, business forum told at COP28

Updated 01 December 2023

Innovative private sector must play its part in energy transition, business forum told at COP28

DUBAI: The private sector can no longer be on the periphery of energy transition efforts, Commonwealth Secretary-General Patricia Scotland has insisted on the sidelines of the UN Climate Change Conference.  

Speaking at the Business Philanthropy Climate Forum — a first-of-its-kind event held alongside COP28 in Dubai — Scotland appealed directly to commercial enterprise leaders to use their capital, talent and innovative capacity to tackle global warming. 

The event brought together over 1,300 CEOs and philanthropists, as well as 250 foundation heads from 55 countries, with the aim of facilitating a paradigm shift toward collaborative, action-oriented participation.   

 Addressing the forum, Scotland said: “The idea that the private sector is peripheral to such a profound crisis cannot be the standard.   

“The private sector is exposed to the impacts, and it is central to the solution, not just through the provision of capital, but through your capacity to innovate.”  

In the inaugural year of the global stocktake, it has become evident at this COP that, despite ongoing global efforts to offset emissions, the gap between current progress and necessary benchmarks continues to widen, according to Scotland. 

In order to meet the ambitious target of achieving net zero, an estimated $4 trillion is needed each year until 2030. This includes an unprecedented investment required for deploying the vital technology essential to accelerate the energy transition, as outlined by the secretary-general. 

In 2021, climate finance flow amounted to $630 billion, just a sixth of the required amount, emphasized Scotland. 

She added, “We cannot fill this gap without the private sector … without accessing the right private sector support potential to unlock transformational investment in mitigation and adaptation, especially for small, vulnerable, and developing countries.”  

Scotland emphasized the necessity of collaborative efforts to create the right environment to enable these investments, addressing upfront costs, long time horizons, and the absence of data — factors that can make a crucial difference and fulfill the required conditions. 

The notion that the private sector is independent of the effects of climate change is not one that is rooted in truth, Anil Soni, CEO of the World Health Organization Foundation, said while speaking on a panel at the forum. 

He emphasized the cascading effects of natural disasters and severe weather events, which ultimately disrupt supply chains and affect businesses.  

Soni cited the cholera outbreak in Malawi as a consequence of flooding, leading to health issues, migration, potential conflicts, and subsequent impacts on business returns, supply chains, and customers. 

“Because of all of that, you see climate change in practice through health effects; you see it in conflict, and you see it in your business returns. Businesses should be motivated because, you know, this is going to affect your supply chain, and you know what’s going to affect your customers,” he explained.

Speaking at the forum, Brian Moynihan, CEO of Bank of America, reaffirmed that the private sector is the necessary piece needed to bridge the gap. He deemed the energy transition a business and operational challenge that the private sector must deploy its talent, capabilities, and money to overcome.

Moynihan emphasized that the public sector cannot achieve this massive undertaking alone.  

He stated, “They (the public sector) don’t have the money and the talent that’s in this room, represented by all of you. So, we’ve got 48 hours to get to work. Let’s take action; let’s make progress.”

As one of the key private sector players at the forum, Amazon’s Chief Sustainability Officer Kara Hurst highlighted the company’s shift in investments toward companies that can develop new technologies for achieving net-zero goals. 

Amazon, for the third consecutive year, held the position of the largest corporate purchaser of renewables globally, with a 23 gigawatt portfolio, Hurst noted. 

Through the BPCF, the company aims to “share how we’re doing this, and we want our supply chains to be involved in that as well. So, there’s a lot of work to do collaboratively in these areas, and a lot that I think that we can do together and collectively.” 

During his inaugural address, Jafar Badr, chairman of the BPCF, stressed that governments, businesses and philanthropists cannot continue to operate in silos, adding that the private sector must fulfill its crucial role in ensuring a just transition.  

Referring to the breadth of nationalities and organizations at the event, Jafar said: “This unprecedented scale and diversity sends a clear and powerful signal that the private sector is ready to engage. And in doing so, business and philanthropy will become the connective tissue between COP presidencies.”  

He added: “This powerful partnership can facilitate consistent progress towards Net Zero, no matter which way the political winds are blowing in capitals around the world.” 

The call for more private sector involvement was echoed by the head of the Financial Services Regulatory Authority at Abu Dhabi Global Markets, Emmanuel Givanakis.

Speaking at the forum, the CEO insisted that regulators need to show more flexibility to adapt to the evolving landscape of sustainable finance. 

“The public sector can’t do everything, it's gotta be a combination of both. We are all in this together, this great thing that we are going through is something we’re all having to tackle – we can’t ignore it anymore,” Givanakis said. 

“Policymakers need to facilitate better governance around transition, seeing companies start to think about transition as part of their journey going forward,” he added.

Givanakis praised the recent actions of the sustainable finance working group in the UAE, which has come out with a set of high-level principles encouraging boards to deal with financial risk around transition and climate change. 

In March last year, ADGM built the world’s first regulated carbon trading exchange and clearing house in partnership with the global greenhouse house gas company, AirCarbon Exchange. 

“That framework in essence, took carbon as a carbon-offsets and created them in what we call environmental instruments, and that's just part of the journey, and carbon markets in themselves are not the solution to transition alone. They're just one segment,” Givanakis said.

Another critical area of emphasis in Givanakis’s agenda involves bonds and sustainably linked instruments, underscoring the importance of the finance industry directing capital to the right places, whether in the southern or northern hemisphere, to address global climate challenges. 

Referring to forecasts by the International Energy Agency on the evolving landscape of energy sources, particularly focusing on solar and wind energy, Shemara Wikramanayake, CEO of financial services group Macquarie said that solar will become the world's largest energy source by 2050. 

However, she added: “There are intermittent sources of energy, and the transition journey is a meandering one, not just for those in finance, but in the real economy.” 

Additionally, Wikramanayake provided an example in the shipping industry, illustrating how a shift from liquefied natural gas to methanol has proven successful in reducing emissions. 

“We have now 200 ships and shipyard being developed and running on methanol instead of LNG because human innovation and technology bring costs down,” she said. 

On the note of calling people to action, Givanakis concluded his statements by encouraging open-mindedness and innovation in addressing challenges, particularly emphasizing that existing solutions may not be the only answer. 

“Don't think that the only solutions are the ones that we already have. If we put our minds together we can solve a lot of problems, and major ones like climate change,” he said.