Explained: How US-Iran tensions impact the economy

Delhi Jan 08, 2020, 07.41 PM(IST) Written By: WION

File photo Photograph:( Reuters )

Story highlights

America's move to kill Iran's most powerful General Qasem Soleimani has shaken up the global economy.

The tensions in West Asia bring bad news for businessmen. Several international airlines have been forced to re-route their flights, prices of oil have skyrocketed and India too is feeling the pinch.

Investors are rattled by the volatility in the stock markets and if the crisis continues, it could trigger more trouble for a slowing global economy.

The escalating tensions are driving fears of a recession, investors are worried about the prospect of a conflict. America's move to kill Iran's most powerful General Qasem Soleimani has shaken up the global economy.

If a war-like situation comes up, airlines will have to spend more on insurance as well. They would need to pay anywhere from $18 thousand to $40 thousand more per aircraft every month.

Assurances from the organisation of petroleum exporting countries or OPEC helped in stabilising the prices. But if the war clouds remain, global oil prices could rise again.

Such a situation would be bad news for India - a country that imports more than 80 per cent of its oil needs. 

A $10 dollar increase in crude prices would increase India's monthly import bill by $1.5 billion whereas retail inflation would rise by around 0.4 per cent.

The likelihood of full-blown conflict is a far cry as of today. But, the prevailing tensions are already hurting the bottom line of several global businesses around the world.