This war has a wide impact on the world economy. ed conway

There is no other place on the planet with such concentrated reserves of energy as the Arabian Gulf.

This is the great paradox that has both haunted and sustained the region for decades; This is part of the reason why so many countries around the world are interested in what’s happening there – and that’s the main reason why war in the gulf Very dangerous for global development.

It’s tempting, given that it’s 2026, not 1976, to assume that oil prices no longer matter. And it is certainly true that the direct contribution of oil to global GDP is much lower today than it was 50 years ago. However, disruption of hydrocarbon supplies from the Gulf remains of significant importance today for two reasons.

Latest Markets: Key developments as war engulfs the Middle East

First, we are not just talking about oil. We are talking about fertilisers (derived from natural gas). We’re talking about plastics (from many petrochemicals produced from gas and oil). We’re talking about the composite materials used to make the fuselages in the latest passenger jets and Formula One cars. It all starts with oil and gas coming out of the ground. And there are no greater reserves of those hydrocarbons anywhere on the planet than here.

That’s point number one. Point number two is that most of those hydrocarbons have to exit the Gulf through a single, narrow sea corridor known as the Strait of Hormuz. And since this strait borders Iran to the north, the important question arises as to how easily we can obtain these essential materials for human civilisation in the future.

Point number three raises a significant doubt about our ability to establish the project from the outset. The biggest event affecting the market today was the news that Qatar is closing the Ras Laffan facility. Very few people have heard of Ras Laffan or the North Field, the gas reservoir into which it is plugged. But Ras Laffan is the largest gas terminal on the planet and the North Field is the largest gas field. In fact, it is much more than that. It is the largest source of energy anywhere – bigger than any oil field or any uranium mine.

Read more:
What are the risks to petrol prices?
Why is the Strait of Hormuz vital?

All of this helps explain why gas prices soared as much as 50% when the news broke. Currently most of Qatar’s gas goes to Asia but in the coming years many countries, including Britain, are expected to become increasingly dependent on Qatar for liquefied natural gas. Now, however, there’s a big question mark over that supply — not to mention when Ras Laffan will start pumping it again and when liquefied natural gas tankers will be able to safely pass through the Strait of Hormuz.

Now, what the situation means for the UK economy is still unclear. If gas prices fall sharply again, the impact on bills will be minimal. Wholesale prices are still far lower than they were in 2022, even with today’s spike. However, the longer the situation goes on, the bigger the impact will be on Europe and the UK. Having barely recovered from the energy price shocks of recent years, we are unlikely to run into another problem.

In short, we should all view events in the Gulf with real concern.