War and Your Pocket: The Israel-Iran Conflict Costs You Money

The war between Israel and Iran may seem like a distant conflict, but its consequences are already reaching your wallet. From the price you pay for gasoline to the value of your savings, this is the economic war being waged alongside the military one.

Beyond the explosions and diplomatic declarations, the direct confrontation between Israel and Iran has unleashed a silent but global war: an economic war. Uncertainty in one of the most vital regions for global energy has triggered a domino effect that threatens to slow the economy, reignite inflation, and directly affect the personal finances of millions of people around the world.

The reaction of the energy markets was immediate and overwhelming. Fearing a supply disruption, the price of Brent crude, the international benchmark, soared, approaching the psychological barrier of $100 per barrel.

Analysts warn that this could be just the beginning. A prolonged conflict affecting shipping routes, such as the strategic Strait of Hormuz (through which nearly 20% of the world's oil transits), could remove up to 5 million barrels per day from the market. In a maximum escalation scenario, the price could easily reach $120 or even $150 per barrel, a figure reminiscent of the great oil crises of the 20th century.

More expensive oil is the perfect fuel for inflation. Experts estimate that a sustained increase of just $10 a barrel can add up to 0.5 percentage points to the inflation rate in advanced economies.

This phenomenon is already being felt in the real economy. In countries like Argentina, the conflict caused an immediate 5% increase in gasoline and diesel prices at the pump. But the impact goes beyond fuels. The price of key agricultural inputs, such as urea (an essential fertilizer), soared by 20% due to the disruption of production in the region. This higher fertilizer price inevitably translates into more expensive food at the supermarket.

In times of crisis, investors don't take risks: they seek refuge. This behavior, known as "flight to quality," has direct consequences. The US dollar strengthens as investors around the world buy assets denominated in this currency, considering it the safest.

At the same time, the Volatility Index (VIX), popularly known as the "fear gauge," soared 15%, reflecting the panic in the markets. Gold, another traditional safe-haven asset, saw its value rise during the crisis before falling 1.8% after the ceasefire announcement, demonstrating its sensitivity to geopolitical tensions.

Interestingly, amid the chaos, the stock markets of the warring countries showed surprising strength. Both the Tel Aviv Stock Exchange (TASE) and the Tehran Stock Exchange (TEDPIX) reached record highs during the conflict, even after an Iranian missile struck near the Israeli stock exchange building.

This paradox is explained by different but equally revealing logics:

• In Israel, investors are not rewarding peace, but resilience. Capital flowed heavily into the defense, cybersecurity, and technology sectors, anticipating increased military spending and a show of strength.
• In Iran: The stock market rally isn't a response to a strong economy, but rather the opposite. It's an act of desperation. Faced with a massive devaluation of the local currency (the rial), Iranian citizens and companies are buying stocks as a safe haven to protect themselves from hyperinflation and the loss of purchasing power.