Israel has been fighting its longest war since its creation, triggered by the surprise attack by Palestinian militant group Hamas a year ago on Oct. 7. The attack launched that morning in southern Israel by militants crossing over the Gaza border claimed nearly 1,200 Israeli lives and over a hundred were taken hostage.
In response, Tel Aviv launched a blustering invasion of Gaza with a fierce bombing campaign, followed by ground assault. Prime Minister Benjamin Netanyahu, battling unpopularity domestically, vowed to eliminate Hamas from Gaza, rescue Israeli hostages, and restore the country's much-admired yet shaken military superiority in the region.
Over 40,000 Palestinians in Gaza have been reportedly killed in the war, creating a humanitarian crisis.
The past 12 months have seen tensions spiral on an escalating ladder. Israel's actions during the Gaza War drew international condemnation and anger from regional foes such as Iran and groups aligned with the country.
As the Gaza war dragged on, Iran-backed Hezbollah in Lebanon and Houthis in Yemen entered the conflict. Hezbollah launched rocket attacks over Israeli towns, while the Houthis targeted ships they claimed were associated with Israel, which were traversing the Red Sea and the crucial Gulf of Aden maritime corridor.
Iran also launched ballistic missiles at Israel after the assassination of Hamas leader Ismail Haniyeh in Tehran in July and Hezbollah chief Hassan Nasrallah in Lebanon earlier this month.
Furthermore, Israel's western allies, such as the US and the UK, increased their military presence in the region.
Global Economic Impact
The war in Gaza, which morphed from a local Israel-Hamas conflict into a wider Middle East confrontation, took its toll on the world economy. Here's how:
Brent Crude Oil
Within days of the Oct. 7 Hamas attack on Israel and subsequent Israeli response, oil prices soared to over $90 per barrel. Countries like Saudi Arabia, Iran, and the UAE are major oil producers.
Fears of a new Arab-Israeli conflict led to concerns about supply from the region, which accounts for nearly a third of global oil production.
The prices were also influenced by Houthi attacks via drones and militant hijacks of oil tankers in the Red Sea and Gulf of Aden. The strategically vital Bab-el-Mandeb strait, which connects the two waterbodies, became a maritime flashpoint.
Nasrallah's killing last week and Iran's missile fire at Israel led international benchmark Brent crude soaring 8%, or a gain of over $5 per barrel, on fears that Tel Aviv could launch an attack on its arch foe's energy infrastructure.
Goldman Sachs says a sustained fall in Iranian output could send oil prices up $20 a barrel, according to a CNBC report.
Equities
The widely tracked MSCI ACWI Index, which captures large and mid-cap representation across developed and emerging market countries, saw a dip during times of escalation in the Israel-Gaza war.
Gold
The traditional safe haven saw greater investor interest during the Israel-Gaza conflict. Since Oct. 7, gold prices have increased by 45%, and during the early stages of the conflict, they reached a significant milestone of $2,000 per ounce.
Other factors influencing demand during the rush to the yellow metal included central bank purchases and global ETF flows.
Gold prices skyrocketed, especially when tensions between Israel and Iran escalated last year.
Shipping
Maritime trade passing through the Suez Canal and Gulf of Aden took a big hit after the onset of the Israel-Gaza war. The Houthis, controlling large parts of Yemen and aligning with Iranian interests in the region, began targeting ships passing through waters close to the Yemeni coast.
The major chokepoint of Bab-el-Mandeb became a major target via drones and hijacks to disrupt movement in a route that occupies nearly 10% share in global seaborne trade.
This forced vessels to ship goods via the Cape of Good Hope in southern Africa rather than the Red Sea, an extra 3,500 nautical miles that added fuel and extra costs.
This has resulted in rates to move a 40-foot container from Shanghai to Rotterdam jumping to more than $7,300 in the last week in June, according to Drewry data on Bloomberg.
A Crisil report also warned of its impact on Indian exporters, particularly in the petroleum sector.
IMEC Corridor
The conflict poured cold water on the ambitious India-Middle East-Europe Economic Corridor (IMEC) announced in the G20 Summit last year. The plan involved a vast road, railroad, and shipping network among Saudi Arabia, India, the US, and Europe with an aim to ensure integration among Asia, the Middle East, and the West.
External Affairs Minister S Jaishankar said the conflict was a "source of concern" for India, and the expectation generated following the firming up of the initiative in 2023 has to be "adjusted" a bit now.
Finance Minister Nirmala Sitharaman also acknowledged the conflict in Israel and Gaza poses a challenge to IMEC.
The initiative requires Saudi, Emirati, Jordanian, and Israeli involvement—the first three Arab nations now at odds with the Jewish state.
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