Economic ripple effects from Gaza war felt across the globe

Widespread outrage

Meanwhile, there has been widespread global outrage at Israel's war on Gaza. Western brands, particularly those supportive of Israel, including McDonald's and Starbucks, have been attacked in some Turkish cities.

McDonald's Turkey is owned by a group based in Qatar and has no affiliation with McDonald's in Israel. The company issued a hasty statement to clarify that and donated to humanitarian groups in Gaza.

Turkey's stock market has been volatile amid the wider geopolitical uncertainty.  Sentiment among traders and investors remains fragile. The main benchmark index dropped by almost 10% in the immediate aftermath of the 7 October. It remains around 9% lower than it was before the attacks.

The lira was already under pressure,  but fell further as global currencies markets reacted to the change in geopolitical circumstances, dropping by a further 4%.

If the ceasefire doesn't hold, the economic implications could become more severe, in line with its significant political impact.

India's telecommunications upgrade under threat

India is in the process of installing a 5G telecommunications network. Some 67% of the equipment used for the upgrade is imported, and the rupee is exposed to the implications of the war via the pressure it has put on emerging market currencies.

The Economic Times newspaper reported that India's currency could fall by between 3% and 4% against the dollar in the event of a prolonged war. A weakening currency makes imports more expensive and increases the cost of servicing foreign debts. Both these factors may delay the 5G rollout and the wider economic benefits it will bring to India in turn.

The war also threatens to harm trade between India and Israel. Imports of electronics and telecom components alone are worth $411mn every year. Other major exports include diesel, worth around $5.5bn. The trade in cut-and-polished diamonds is worth $1.2bn. In rough diamonds, it is worth $519mn.

Energy imports are also at the forefront of India's worries. It is the world's third-largest consumer and importer of oil, with around 44% of its supplies originating in West Asia. However, Russia's share of India's imports has increased following Moscow's invasion of Ukraine.

The Reserve Bank of India has estimated that a 10% jump in oil prices can cause inflation to soar by about 30 basis points, hitting economic growth by about 15 basis points.

But India could also become home to some multinational companies with headquarters in Israel, which are reportedly considering a move. This includes giants like Intel, Microsoft, and Google. India is known internationally as an attractive destination in terms of manageable costs and skilled labour, especially in high-tech industries.

The Hindustan Times reported that Intel was "closely monitoring the situation in Israel and taking steps to safeguard and support our workers," according to a spokesperson for the company.

Russia's focus is military aid

Vladimir Putin's primary political hope from Israel's war on Gaza will be that it will distract the West from the war in Ukraine and that it could delay or divert some of the military aid to the army he is fighting.

In terms of the economy, there are some advantages that Russia could seek to exploit.

At the recent G20 summit in New Delhi, the United States, United Arab Emirates, Saudi Arabia, the European Union, and India signed a memorandum to establish a new trade road connecting South Asia to Europe via the Middle East.

It would have sidelined alternative routes via Russia and undermined parts of a similar Chinese project, the Belt and Road Initiative, which is friendlier to Moscow's interests.

The outbreak of war makes such large-scale investment from the G20 consortium less likely, or at least means it may take longer.

With energy markets at the forefront of the global reaction to the war, Russia's role as a major exporter is directly relevant. But industry experts say it is too early to tell if the war in Gaza will reshape the worldwide supply lines for oil in the context of a long period of turmoil in the region.

Vladimir Milovidov, head of the Department of International Finance at the Moscow State Institute of International Relations, said: "The oil market has not yet responded strongly to these events. If we take the period from the beginning of 2023, the Brent crude oil price occurred in mid-September at approximately $95 per barrel."

"Now, the price is at $86, almost the average annual level, maybe a little higher. Any interventions from OPEC+ are unlikely at this stage."

The war may also deter Russian citizens from joining a trend to move to Israel, established since the invasion of Ukraine.

But the trend held long enough to mean that many Russian citizens are already there. Some estimates put the number at over 70,000 people from February 2022 to July 2023, including people from Belarus and Ukraine.

The New York Times recently reported that around 7,000 had left Israel in the two weeks immediately after 7 October. This exodus might prove to be a new boost for other countries in neighbouring regions, such as Georgia and Armenia, where many other Russians have already found a new home.

As with any crisis of this scale, the economic consequences take longer to emerge than the political implications. But they will emerge over the weeks and months ahead. A full resumption of hostilities will have deeper and longer consequences, not just on the Middle East but across neighbouring regions.

If the ceasefire holds, the worst extent of the impact may be avoided.