Mexico | Escalation of War in the Middle East Could Generate Global Economic Disruptions

Summary

In addition to the tragedy that human losses represent in the War between Israel and Hamas, global economic repercussions are multiple and can affect economies geographically distant from the epicenter of the armed conflict, which reinforces the motivation to prevent terrorism in all the possible scopes.

Key points

• Key points:
• Given the accelerated evolution in the media and the availability of information, the economic consequences that wars imply for the global economy generate market reactions in real time.
• The probability of a soft landing in the US is now lower, due both to a potential increase in energy prices that a broader conflict could imply, and to the expectation of high rates for a longer period.
• The escalation of the conflict in the Middle East could generate lower growth in the global economy due to the obstruction of global trade flows of goods and inputs.
• In Mexico, global disruptions in the face of a broader war could imply alterations in value chains, inflationary inertia derived from the increase in energy prices, and exchange rate depreciation.
• In Europe, pressures on the energy matrix due to the relatively greater dependence on supplies from the Middle East (compared to the period prior to the war between Russia and Ukraine), could impact economic growth and public finances.

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