Energy, aviation, insurance, automobile: What could be impacted as US-Iran war restarts

US-Iran war: In a rather concerning turn of events, US President Donald Trump said that the peace agreement between Iran and the US was over. The US launched a fresh wave of military attacks against Iran, and targeted facilities across its southern coast. 

Trump said the strikes were "in retribution" for Tuesday's assault by Iran on three cargo ships transiting the strait. Hours later, Iran said it had attacked ​US military sites in Bahrain and Kuwait in response to the new US strikes on infrastructure. 

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While both the countries signed the peace MoU despite a lot of resistance, they are both at the precipice of restarting the war that had seen blockades, sanctions, trade disruption, apart from the military strikes for around four months. 

The re-escalation of hostilities between the two countries does not bode well for the region as well as for rest of the countries across the world, including India. As evinced from the past few months, an escalation could disrupt a wide range of sectors and supply-demand chains, increase inflation, apart from the casualties of war and the geopolitical uncertainty. 

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Here’s what could be impacted (again) if the US-Iran war continues:

Energy: A major chunk of the global energy needs – oil, natural gas – flows through the Strait of Hormuz, which has been weaponised by Iran in its war against the US. Iran blocked this major waterway in order to inflict economic pain, and to strongarm other nations to pressure the US to give in to Tehran’s demands. It is but natural that Iran would return to its well-oiled tactic to gain an upper hand. This would mean attacking ships and vessels, and disrupting the crucial energy trade, which would disrupt supplies and increase prices.

Aviation: The Iranian and nearby airspace was out of bounds due to missile and security threats. Airlines were forced to take longer routes, thereby rising costs for operators as well as for passengers. Flight durations increased too. 

Insurance: Due to the significant threat to ships, maritime insurance became one of the most rapidly increasing costs for global trade. 

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Fertilisers: The Gulf is a key source of urea, ammonia, sulfur, and other fertiliser inputs, as mentioned by the World Economic Forum. Disruptions in the area reduced supply and led to a rise in prices. It is not only the high costs but the disrupted supply that impacted farmers in India, Brazil, Canada and sub-Saharan Africa. 

Automobile: This sector was doubly-hit. Higher fuel prices brought down purchasing power of the consumers, while a disruption in component supplies impacted production of automobiles. Logistic and manufacturing costs also went up. 

Tourism: The uncertainty globally, and especially in the region, impacted tourism. With increased fares, unsafe airspaces, and sudden attacks, tourists avoided the West Asia region. 

Defence: Governments increased defence spending and procurement as uncertainty loomed on the horizon, in turn feeding into the geopolitical tensions.