The Middle East faces economic chaos

Staring into the abyssimage: Getty Images Just over 100 days after Hamas’s brutal attack on Israel started a war in Gaza, the conflict is still escalating. On January 11th America and Britain started attacking Houthi strongholds in Yemen, after months of Houthi missile strikes on ships in the Red Sea. Five days later Israel fired its biggest targeted barrage yet into Lebanon. Its target is Hizbullah, a militant group backed by Iran. A full-blown regional war has so far been avoided, largely because neither Iran nor America wants one. Yet the conflict’s economic consequences are already vast. Trade routes are blocked, disrupting global shipping and devastating local economies. The Middle East’s most productive industries are being battered. And in Lebanon and the West Bank, growing hardship threatens to spark even more violence. Read all our coverage of the war between Israel and Hamas Start with trade. Before Hamas’s attack, a fifth of the average Middle Eastern country’s total exports—from Israeli tech to oil from the Gulf—were sent somewhere else in the region. Geopolitical enemies were increasingly trading with each other. Now, the routes that transported more than half of all goods are blocked. Intra-regional trade has collapsed. At the same time, the cost of shipping goods out of the Middle East has risen. That will send many exporters, operating on razor-thin margins, out of business in the months to come. image: The Economist The Red Sea used to handle 10% of all goods moving around the world. But since the Houthis began launching missiles, its shipping volumes have dropped to just 30% of normal levels (see chart). On January 16th Shell, an oil and gas giant, became the latest multinational to say it would avoid the Sea. For some of the countries bordering the Red Sea, Houthi missile strikes […]

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By Donato