The war between Iran and Israel is getting worse. It is no longer just a military fight but also a long economic struggle. The effects are bigger than just the fighting areas. This war is happening in a very important region for world energy and trade. It is costing not only money for the war itself but also causing problems for markets, economic growth, financial stability, and government budgets. Because of the close connection between the region’s geography and politics, this war may change the balance of power in the area. It could also cause big problems in energy prices, inflation, and investments. These problems will affect not only Iran and Israel but also the world economy.

Each side is losing about one billion dollars every day because of this war. If it goes on for a longer time, the total cost could reach about 150 billion dollars in three months. This amount is about 36 per cent of Iran’s economy and one-quarter of Israel’s economy. This shows the war will have a big and lasting effect on both countries’ economies.

Even though the war is in a region that produces 30 per cent of the world’s oil and 17 per cent of the world’s gas, oil prices have stayed fairly steady at around 74 dollars per barrel. This is because countries like Saudi Arabia, the UAE, and Russia are keeping their oil supply steady. But if the war causes problems in the shipping routes through the Strait of Hormuz or if oil facilities in the Gulf are attacked, oil prices could rise sharply above 100 dollars per barrel. This would hurt the world economy.

For natural gas, the war could cause a global gas crisis, especially in Europe. Gas prices there have already gone up by about 15 per cent, or 4 dollars more per unit of energy. Experts warn that prices could jump to 25 dollars if gas shipments through the Strait of Hormuz stop. This would cause a serious energy crisis in Europe during the next winter. Since Europe stopped buying gas from Russia, it now depends mostly on liquefied natural gas from Gulf countries that passes through this strait. Gas storage in Europe is also low. For example, Germany, Europe’s biggest economy, has only 49 per cent of its gas storage filled, which is worrying if the political problems continue.

The World Bank expects the Middle East and North Africa to grow by 2.6 per cent this year, then 3.7 per cent in 2026, and 4.1 per cent in 2027. This growth is because of more oil production and more investments. But if the war continues, these numbers could fall. Growth in countries that don’t produce oil could slow down, costs for shipping and insurance could go up, and big investment projects in energy, technology, and logistics could be delayed.

The economic facts show clearly that the war weakens both Iran and Israel. It costs them a lot of money and hurts their financial systems, markets, and investor trust. Both countries use their strengths—Iran uses its location and energy, Israel uses technology and support from the West but both have very little room to move because of economic problems.

Israel’s economy is varied and strong enough to last a short time, but security issues and social problems might cause bigger problems in the future. Iran faces sanctions, high inflation, and lack of options, so the war is a big risk to its stability inside the country.

Raad Mahmoud Al-Tal is head of Economics Department – University of Jordan– [email protected]