War in Iran - Economic Brief

In The World of Work there are global shocks that impact everyone. In today's episode we do a quick review of the Iran War and how you should be looking at it from an economic point of view. 

Transcript

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Hi there, I'm Todd Jensen, and welcome to the world of work. One of the things I'll be doing regularly on this show is giving economic briefings. Short episodes on the economic situation in a specific country or on a specific topic. The idea is to help my listeners get used to the idea of understanding their world from an economic point of view. So today I want to talk about the economic impacts of the Iran war. Set aside whether you think that the war was a good idea or not, let go of your arguments around the reason it began, or whether global leaders are playing checkers or chess, or the nature of the Iranian regime, or the Israeli and American political leadership. All of those are interesting topics, but that's not my focus. Let's start with Iran. Al Jazeera is reporting that there are going to be around 12 million jobs at risk in Iran. This is a huge economic dislocation that will have dire consequences for the broader population of Iran. But as the military campaign continues and information out of Iran is sparse, we won't know the full nature of that crisis for a little while. There are buyers of Iran's exports, mostly oil, mostly China. And there are a host of countries that sell goods to Iran, things like food and agricultural products, vehicle parts. If you're working in one of those ancillary countries delivering goods to Iran, pay attention to where that might send your local job market. What about the economic impacts everywhere else? You've probably been seeing the news about how oil markets are impacted with Iran using passage through the Strait of Hormuz as leverage against its neighbors and enemies. And it's an effective tactic. This is now already the biggest energy shock that the world has seen since the 1970s. If you're curious, Google the 1973 and the 1979 oil crisis for a summary of how that impacted the world. Oil isn't just used for gas in those big SUVs that rich, fat American people drive. It's a cost for how millions of people get to work or how supplies and goods are distributed. I'll give you an example. Airlines often make negotiated contracts with suppliers for jet fuel, insulating them against dramatic price swings. But what if those suppliers run out of fuel? European media and the Wall Street Journal are all reporting Europe has about six weeks of jet fuel left. So you can see it doesn't take much imagination to understand that the longer this crisis goes, the wider and more severe the impacts will be on people of every economic status. If you're a DoorDash driver in Uzbekistan, barely scraping by, or a Grab driver in Vietnam, Grab is their version of Uber. There's only so much cost that can be passed along to the customer. Either rides will slow down or profitability for the drivers will plummet. An oil slash fuel crisis is a big, looming, and expensive problem for just about everybody. The International Monetary Fund, IMF, non-government organization that pays close attention to economic factors, global economic factors, just reported some interesting changes to GDP growth. This is the kind of insight that can help you today as you're looking for jobs in your country or finding a better job. The IMF is anticipating that global growth measured in GDP numbers for each country will slow through 2026 and into 2027. But what's interesting is where the severity of the slowing will occur. For European Union areas, they project very modest growth with a slight slowing. China takes a whole percentage point hit off of their growth production, a little more than the percentage point. And Middle East countries are projected to have a very sharp slowing of their economic growth with a rebound by 2027. Very interestingly, low-income developing countries show almost no projected change. And that's probably because there isn't as much heavy industry in those countries that an energy crisis would provide a shock to. Finally, one big source of concern is that the war is going to create a very serious natural gas crisis. While that's not a big concern in my country because of our natural gas industry, it's a huge concern for places like India, where they're already anticipating several price and supply risks because of a pinch that the products supply, which is routed through the Strait of Hormuz, and because capacity was damaged by Iranian missiles in the region. This creates problems for India in transportation, manufacturing, food production, and fertilizer. Lots of other countries are going to have those same kinds of problems with the natural gas shortages or cost impacts. So this isn't good news, but I believe knowledge is power, and the more you know, the better you can navigate the uncertainty where you live. Remember, wherever you are, be valuable. Take responsibility for where and how you work. Make the business better. It's my goal to share insights and qualities that will open bigger and better doors for you throughout your career, making you happier and more prosperous, even when bad things are happening around you. If you like what you're hearing, rate and subscribe on your favorite podcast platform and invite others to listen. Stick with me on this journey as I tell you how the world of work really works.