The conflict arose when Iran launched a drone attack on Israel after Iran’s embassy was bombed in Syria. The speculations about Israel counter attacking Iran raise concerns about its impact on the global as well as Indian economies. To make it all better, we have curated an article stating India’s stand on this issue and its potential impact on its economy.

The military conflict: the beginning

Iran’s air strike, called Operation True Promise, came into play as a result of Israeli war jets targeting the Iran embassy in Syria. The air strike was carried out by Iran’s paramilitary force, called the Iranian Revolutionary Guard Corps. This is the first time in history that Iran has directly attacked Israel. India has addressed it as a ‘humanitarian’ tragedy and is sustaining its neutral stand, emphasizing escalation.

"We call for immediate de-escalation, exercise of restraint, stepping back from violence and return to the path of diplomacy. We are closely monitoring the evolving situation... It is vital that security and stability are maintained in the region," states the official statement of India’s foreign ministry.

Conflict’s potential impact on the Indian economy

The arising conflict can affect the global as well as Indian economies in various ways. It all depends on both the involved nations if they choose to make peace or if the situation worsens. “If things remain where they are and there is no retaliation from Israel, then the nervousness should ease in a couple of days, and it should be back to normal,” says Madan Sabnavis, the chief economist with Bank of Baroda, as reported by India Today.

The global economy has already suffered because of the COVID-19 pandemic and is gradually recovering. 

• Rising crude oil prices leading to inflation: In case the conflict continues, crude oil prices will rise, resulting in inflation for a country like India, which heavily depends on Middle Eastern countries for its oil demands.
•  Another impact would be the weakening of the rupee and the widening of the CAD, or current account deficit. CAD is an instance when a country transfers more money abroad than it receives.

Indian Stock Market and Global Market Impacts

• Global stock markets have been experiencing a crash, impacting Indian bourses.

• The BSE Sensex fell over 845 points on April 15, closing at 73,399 points.

• The Sensex breached the 75,000 mark last week, indicating India's strong economic growth outlook.

• Gold prices have increased due to rising Middle East tensions, with gold soaring from Rs 62,200 per 10 gm to Rs 72,800 per 10 gm.

• Crude oil prices will continue to be impacted, with Iran contributing 4% to global oil production in 2023.

• The Federal Reserve's potential higher inflation could lead to elevated bond yields, leading to a rise in borrowing costs.

In essence, the potential impact on the Indian and global economies depends on how both nations get ahead with the conflict. Let us know what you think about the same. Also, to read more about social issues, don’t forget to visit the news section of Ezivote.

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