As the war in West Asia continues, the global economy is getting as badly hit as people in the war zone. The biggest reason for this is energy shipments from the critical chokepoint of the Strait of Hormuz coming to a virtual halt because of the ongoing hostilities. To be sure, not everyone is, or more importantly, will suffer equally if the conflict is prolonged. This is because the Strait of Hormuz is a more important chokepoint for energy supplies
- The war would not have happened without the US agreeing to launch itIsrael has always wanted to attack Iran. It has also been trying to persuade the US to join ranks. No US President before Donald Trump entertained the idea. Trump 1.0 killed the Iran nuclear deal and 2.0 started a full-fledged war. By all accounts, there was very little clarity of objectives or strategy in place – like is the case with all Trump decisions – in case the initially stated plan of a meltdown of Iran within the first couple of days of eliminating the top leadership did not materialize. The confusion in the US’s strategic thinking notwithstanding, its ascent to joining the war was absolutely critical for it to start in the first place.
- While US’s geopolitical leadership is intact, its geoeconomics importance has been going downIn almost all the major oil shocks before this one – in the aftermath of the Yom Kippur war in 1973, the Iranian Revolution which brought in the Islamic regime in power, and the two Gulf Wars – the US was the largest economy in the world, especially in relation to Asia. Not anymore. The combined GDP of the four largest Asian economies – China, Japan, India and South Korea – surpassed the US in the early 2010s and the trend continues. In manufacturing, which is more important from the perspective of global value chains, the gap is even larger.
- US’s falling importance in economic output has been accompanied by its share in energy consumption tooThe total energy consumption of the US had started trailing that of the four Asian countries combined about a decade before its GDP fell behind. This is also now true for oil and natural gas, where the Asian countries surpassed the US in 2017. Just as with economic output, the gap in energy consumption is also growing over time. To be sure, most of this increasing gap is on account of China and India, followed by South Korea. Japan's energy consumption, including that of oil and gas in particular, has decreased since the 1990s.
- US, unlike in the past oil shocks, is not an energy importer anymoreMemories of the 1970s oil shocks in the US include people queuing at gas stations as supplies dried up. Even paying a higher price was not enough for overcome the shortage. Today, if the US wanted, it could insulate its economy and way of life from the oil charges east of the Strait of Hormuz by completely or partially banning energy exports and forcing producers to sell at a lower price in the home market. This makes its risk factor to a global oil shock significantly smaller than what it has been in previous oil shocks.
- Asia did not start the war, but must pay for itThe supply shock due to the war has/will jeopardize everything from food production (on account of fertilizer shortage) to services (such as restaurants) in most Asian countries. The pain will vary according to the level of strategic reserves countries hold. India is perhaps the worst off among the four major Asian economies here. Ironically, three of the four major Asian powers (excluding China) see themselves as strategic allies of the US, yet they are left to fend for themselves, at this difficult juncture, even though the US is the least vulnerable to a global oil shock it has been in its history. The roots of this painful irony lie in the growing asymmetry between geopolitics and geoeconomics in today’s world.
Roshan Kishore is the Data and Political Economy Editor at Hindustan Times. He heads the newsroom's data journalism team, which produces Number Theory, a daily data-driven feature for the print edition and the HT app. Number Theory uses data analysis and story-telling based on it to add value to the newsroom’s daily coverage by putting stories in a larger context on a range of issues, including politics, macroeconomy, markets, global affairs and climate. Under his leadership HT’s data journalism work has established itself as a niche product in Indian journalism and pushed the boundaries of marrying academic rigour with news sense and speed. Along with writing and editing data stories, he has also been writing a weekly political economy column called Terms of Trade for HT Premium. A trained economist with an MPhil degree from Jawaharlal Nehru University, Kishore has also been a visiting fellow at the Centre for Advanced Studies of India (CASI) at the University of Pennsylvania. Along with his journalistic work, his writings have also appeared in journals such as the Economic and Political Weekly and working papers for CASI and UNESCAP.
Abhishek Jha is Assistant Editor-Data at Hindustan Times. He uses statistical programming to generate newsworthy insights from large datasets. He is part of the team that produces Number Theory, a daily data story feature of the paper’s print edition. Since March 2024, he has been writing Weather Bee, a weekly column for the Hindustan Times website. He is a chemical engineer by training, who specialises in stories related to weather, climate, and the environment. Jha has been at HT since 2018, where he offers data-driven perspective and analysis on politics, environment, weather, climate, economy and society. His work includes data coverage of elections in India and abroad, including the 2019 and 2024 Lok Sabha elections; the disasters and extreme weather resulting from changing climate, such as floods, droughts, heat waves, cold waves, and dwindling snow cap in the Himalayas; the factors that drive poor air quality in northern India; the changing patterns of land use; the Covid-19 pandemic and its impact on labour market conditions; the changing pattern of consumer spending seen in the new consumer spending surveys; and social norms seen in the surveys such as the National Family Health Survey.
Sreedev Krishnakumar is a data journalist who specialises in stories at the intersection of the economy, geopolitics, politics and finance. His work combines data analysis, reporting and visual storytelling to explain complex issues through evidence-based journalism, with a focus on making public data accessible and meaningful for readers. He joined the Data and Political Economy team at Hindustan Times in 2024 after working as a correspondent/data journalist at Moneycontrol, where he covered macroeconomics, markets, public finance and business. Over the course of his career, he has developed expertise in analysing large datasets, building interactive visualisations and using computational methods to uncover trends and patterns that inform public debate. Sreedev holds a Postgraduate Diploma in Integrated Multimedia Journalism from the Asian College of Journalism. His reporting interests include finance, economics, geopolitics, trade, technology and development.