A prolonged conflict in the Red Sea and escalating tensions across the Middle East risk having devastating effects on the global economy, reigniting inflation and disrupting energy supplies, some of the world’s leading economists warn this weekend.
Before a statement expected on Monday by Rishi Sunak in the House of Commons about UK and US airstrikes on Houthi sites in Yemen, economists at the World Bank say the crisis now threatens to feed through into higher interest rates, lower growth, persistent inflation and greater geopolitical uncertainty.
After a second night of strikes against the Iranian-backed rebels in Yemen, President Joe Biden said that the US had sent a private message to Tehran that “we’re confident we’re well prepared”. Speaking to reporters on the White House lawn on Saturday, on his way to Camp David, Biden declined to go into further detail.
But there is now growing concern in government circles in London and Washington that as Sunak and Biden fight for re-election, events in the Middle East could dash what had looked like improved prospects for economic recovery and therefore their chances at the ballot box.
While the airstrikes against Houthi targets in Yemen have broad cross-party support at Westminster, Sunak will face questions from anxious MPs about a prolonged conflict and the longer-term plan for Middle East peace. Some leftwing Labour MPs are expected to put Keir Starmer under pressure over why he backed the military strikes having said that he would only support such action after parliament had voted in favour of it.
Biden also faced pushback from progressives in his own party, already deeply opposed to US military support for Israeli action in Gaza. California congressman Ro Khanna said: “The president needs to come to Congress before launching a strike against the Houthis in Yemen and involving us in another Middle East conflict.” [Continue reading…]