Israeli Navy missile ships patrol near natural gas fields (Photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)
Economists have warned that inflation in Israel could rise if Iran talks fail, as a shock to the oil market would cause fuel prices to rise and ripple through the economy.
Shahar Golomb, a lecturer in economics and finance at Afika College of Engineering, said Israel’s annual inflation rate could rise to 2.5%-3% from a forecast 1.7% if the Islamic regime did not reach an agreement with the Trump administration during the five days of the attack on Tehran’s power plant. jerusalem post on Monday.
“I can say that every $10 increase in oil prices affects the price of fuel at gas stations in Israel, and every $10 change increases the price by about 20 agar. So if the price of oil goes from 60 to 100 or 120, we are talking about a 60 agar increase in the price at the gas station, and that’s before the fuel tax,” he noted.
Golom spoke to The Washington Post before and after U.S. President Donald Trump announced five days of delays in negotiations that almost immediately sent oil prices down more than 13%.
The United States and Iran “have had very good and productive conversations over the past two days regarding a complete resolution of our hostilities in the Middle East,” Trump wrote in an article published in Truth Social. “I have directed the War Department to delay any military strikes on Iran’s power plants and energy infrastructure for five days, pending the success of ongoing meetings and discussions.”
On Saturday, Trump warned that Iran’s power plants would be destroyed if Tehran failed to “fully open” the Strait of Hormuz, which carries a fifth of the world’s oil and liquefied natural gas, within 48 hours. Trump set the deadline for Monday at approximately 7:44 p.m. ET.
Illustration of a man filling up his car with gas at a gas station in Jerusalem on June 28, 2022. (Image source: OLIVIER FITOUSSI/FLASH90)
Columbus describes two possible scenarios for the current conflict. He initially said it was less likely, but after Trump’s announcement he became noticeably more optimistic about the first scenario, which would lead to positive outcomes for the situation adjacent to Venezuela and for Western and Gulf economies.
“them [the US] Take Maduro out of the equation and now Venezuela is pro-American and all is well… Then oil prices will fall and everything will return to normal. Some infrastructure in the Gulf countries has been damaged, so more time will be needed, but things will return to normal and life will go on. I think this will have very positive consequences for the stock market and oil prices,” he said.
He initially said the second possibility was more likely, that oil would become a casualty of the conflict, pushing up international oil prices. First, the United States would either seize or destroy Iran’s Khag Island, which handles about 90% of the country’s crude oil, which would then see the regime crack down on the Gulf state’s refineries even more harshly than it has in the past few weeks.
“So in this scenario, I think oil prices will rise and the U.S. and other countries will respond to the situation by providing a lot of output to the rest of the world, from Venezuela to the U.S. to the rest of the world to calm oil prices,” he predicted. “And then, in addition to the price of oil, you have the commodities that are made in the production of oil, like natural gas, plastics and all these kinds of things, which hurt the economy and ultimately lead to inflation. So that’s the main problem in the second scenario.”
Golom said a large portion of people in Europe and the United States “don’t really understand the conflict” but would understand the increase in the cost of living.
“People will react to rising oil prices. So, that will affect governments. I can’t say for sure, but history tells us that when there is public outcry, governments will eventually listen,” he shared, predicting that the shift in the international landscape will depend on how the West feels about the economic consequences in the long term.
Asked whether this was the final fiscal push Western countries needed to fully invest in environmental, renewable alternatives, Columbus expressed skepticism. He said that even if oil prices are likely to rise in the long term, environmental alternatives are still too expensive and for many products produced from crude oil, alternatives do not exist.
Golomb said that while there would undoubtedly be economic consequences for Europe, the United States and Israel, the move would play a role in determining the new world order.
The Islamic Republic has been dependent on China and Russia for oil sales under sanctions over serious human rights abuses. Disrupting supply chains undermines these powers.
“More importantly, now this is a global war because from an oil perspective, if you look at what’s happening and what the United States is doing: first, take down Venezuela, then Cuba, and then take down Iran,” he theorized. “I think President Trump said at the beginning of his term that the main enemy of the United States is China, and by seizing oil production around the world, Trump is defeating his enemy economically.
“I think it’s a very interesting time for geopolitics. I think the world is changing rapidly before our eyes. The United States was a sinking ship before that war. I think the new world order is changing and putting the United States back in the lead,” he concluded. “Oil has become the new currency, depending on who has it and who doesn’t. So the main issue in this conflict is not ballistic missiles or nuclear issues.” [weapons]. I think ultimately it’s all about oil. If you look at what the United States has done over the past few months and years, oil is the star of the game. “
