The US strikes on Iran cast yet further uncertainty on the international economic outlook. As if there was not enough of this around already. Inevitably, this will have implications for Ireland, too, though to what extent is as yet impossible to judge.
The most obvious way in which this will affect western economies is the price of oil. It will fluctuate now based on the news from the Middle East, in a nervous market. Any sustained rise would lead to increases in petrol and oil prices for consumers and Irish businesses before too long. To judge how serious this could become, a few factors are important.
One is whether there is any impact on the Strait of Hormuz, the narrow channel between Iran and the Gulf states through which around one third of the world’s seaborne oil is transported. It is unclear the extent to which Iran could block these shipments, but it could certainly cause some considerable disruption.
In turn, if sustained, this could lead to a spike in crude oil prices. Goldman Sachs, the investment bank, predicted that oil prices could rise to over $100 a barrel if there was substantial disruption to oil flows through the Strait.
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The second key issue will be whether Iran chooses to target the oil production facilities of US allies in the region, such as Saudi Arabia and Qatar. The resulting disruption in production could hit supply and drive up prices. It would also cause nervousness in the market.
All this means further risks facing the global economy, at an already uncertain time. Sustained higher oil prices would feed through into higher inflation and lower economic growth. This will be an issue, too, for Donald Trump, who will be conscious about the price sensitivity of US consumers, particularly to prices at the pump.
Following the US bombings, the world now looks on to see what Iran does next. Like the rest of the EU, the Government here, already facing the uncertainty from US tariff policy, now has another risk to put into its calculations ahead of the budget.
