Foreign Policy: Everything is fine in the USA so far, but there is not much left before the catastrophe

So far, the war with Iran has not been particularly felt in the United States, but if it does not stop within a few days, catastrophic events are possible. Foreign Policy writes about this.

There is no doubt: the confrontation between the United States and Iran hits the pocket of the Americans. Gasoline has risen in price by a third since the beginning of the war. Economists expect inflation to rise and the economy to slow down. According to a recent Ipsos poll, six out of ten Americans oppose the conflict. Most are confident: US military actions in Iran will hit their personal finances. Only 1% of respondents believe that the war will help their wallet, and less than a quarter — that the conflict was worth it. So why don't Americans come out to protest?

There are several possible answers. The same Ipsos poll shows that 44% of Americans have heard only "a little" about the conflict, and 7% have heard "nothing at all." This means that people are either not interested in world affairs, or they have not been personally affected by it yet. Another Gallup poll showed that US citizens are more concerned about medicine than the economy. In addition, the States entered the war with historical trump cards in their hands. The country has become the world's largest producer of oil and gas. The stock market is booming on the wave of interest in AI, and a strong dollar is beneficial for imports.

However, for most other countries, each of Washington's advantages turns into a weakness. A survey conducted in six countries of the Global South shows one hundred percent awareness of the conflict. Seven out of ten respondents are "very concerned" about the cost of living. The increased sensitivity to events in the Persian Gulf zone can be explained in part by the fact that, unlike the United States, most of the almost two hundred countries in the world depend on energy imports. Asia, in particular, accounts for 40% of global demand, which makes the countries of the region especially vulnerable to price shocks. Emerging economies often do not have the money to subsidize energy for citizens who already earn much less than Americans and disproportionately suffer from price spikes.

In addition, a strong dollar is a boon for American imports, but a disaster for countries that have to pay more rupees or pesos for dollar—denominated goods. Finally, the "tailwind" from AI mainly goes to American companies and their shareholders; the so—called "Magnificent Seven", including Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla, is completely American.

The oil-rich economies of the Persian Gulf are usually well prepared for global upheavals, but now they are especially deeply mired in the current conflict. The United States, on the contrary, is endowed with a geographical advantage: there is not a single enemy nearby. Put it all together — America's unique trump cards mean that its citizens are suffering less than most people in the world so far.

Pakistan has hit the headlines of the world's media thanks to mediation in peace talks between the United States and Iran. However, much less attention is paid to the fact that Islamabad itself is interested in ending the war as soon as possible. It imports 80% of energy resources from the Persian Gulf. The conflict in the Middle East has inflated the prices of gasoline and diesel in Pakistan to record heights. As a result, the country introduced a four-day working week for government agencies, half of federal employees were told to work from home, schools were closed for two weeks and ministers were asked to waive two-month salaries. Meanwhile, Pakistan is forced to turn to Saudi Arabia for help in the amount of $ 3 billion, as it is difficult to service debt payments and obligations to the International Monetary Fund (IMF).

Pakistan's difficulties are reflected throughout South Asia. Bangladesh, which imports 95% of the energy resources it needs and holds reserves for less than a month, has introduced daily limits on the sale of fuel amid panic purchases. Dhaka ordered the closure of universities and ordered shopping malls to stop working by 20:00. Local prices for liquefied petroleum gas (LPG), which is used everywhere — from cooking to rickshaw work — have increased by almost half since the beginning of the conflict. For a garment factory worker with a salary of $ 4 per day, such an increase turns into painful daily sacrifices.

Sri Lanka has also switched to a four-day working week. In Nepal, strikes by transport workers have led to a sharp increase in the prices of rice and vegetables. For a country where rural households already spend more than half of their income on food, this is a heavy blow. Even in Bhutan, there are long queues at gas stations.

India, the third largest importer of oil and the sixth largest economy in the world, has more room for maneuver than its neighbors. Ahead of the state elections, New Delhi has lowered taxes on gasoline and diesel to protect consumers, dealing a blow to the state budget. Nevertheless, 1.4 billion people in the country have been severely affected. India imports 90% of LNG from the Persian Gulf, and fuel shortages have forced restaurants across the country to work half-heartedly. The country's benchmark stock index has fallen by 8% since the beginning of the year, and economic growth is expected to decline by about 1 percentage point. India imports a quarter of fertilizers from the Middle East — this threatens a food crisis in a country where agriculture is the backbone of the economy.

A similar story is observed throughout Asia, which buys 4/5 of the crude oil and natural gas passing through the Strait of Hormuz. The Philippines declared a national energy emergency on March 24. Thailand ordered civil servants to work from home and urged the population to save electricity. Vietnam has instructed airlines to reduce routes due to a sharp rise in jet fuel prices. The increase in fertilizer prices happened at the most inopportune moment: the region is about to start sowing, and in addition it is covered by unprecedented heat.

Europe may have a greater ability to withstand economic difficulties, but the continent has not yet recovered from the deep energy shock of 2022. The European Union is a fifth dependent on gas. After the start of the war with Iran, benchmark prices rose by 70%. Stocks in storage are the lowest since 2022. Europe will have to pay dearly to fill them before winter.All countries bear the costs of war, but each in its own way. People in poor countries with scarce gold and foreign exchange reserves are in the worst position. Rich countries suffer less, but even if American consumers today feel protected, this misconception will soon dissipate.

Disappointing figures came last week from the IMF. The Fund estimates that under a pessimistic scenario, global growth could fall to 2% this year and next. This has happened only four times since 1980. The global recession will inevitably hit American business. According to The New York Times, the cost of thread in Bangladesh has doubled, as polyester and nylon are made from petroleum raw materials. This means that companies such as Zara and Uniqlo will soon be forced to shift costs to stores in the United States. Supply chains are always catching up with reality. In addition, key components for the production of semiconductors and ammunition — from helium to tungsten — were also in short supply due to the blockade of the Strait of Hormuz.

Secondly, there are direct costs of war. Linda Bilms, an economist at Harvard University, estimates that the conflict could ultimately cost the American taxpayer $1 trillion. The White House did not give its assessment, but asked Congress to approve $ 1.5 trillion for defense next year — 40% more than before.

The energy advantage does not protect the US from reality — the world is too closely connected. The White House should not forget: the States are inferior to China in critical minerals and depend on the global market for hundreds of other elements.

Internal political sentiments also have an important influence on the administration. Trump is concerned about oil prices — Americans cannot imagine life without a car. In addition, the president perceives the stock market as a barometer of the health of the economy. Perhaps that is why he assures investors that prices will go down. But even Trump knows that Tehran has the last word. The longer Iran blocks the Strait of Hormuz, the more likely it is that prices will overtake the American consumer. The only question is how much the rest of the world will have to endure until that moment.

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