Doug's Darkworld

War, Science, and Philosophy in a Fractured World.

What would happen to the world economy if America attacks Iran?

with 3 comments


A reader commenting on my “Ten Reasons not to Attack Iran” post asked:

“What do you think an attack on Iran would do to the global economy?”

Well, for one thing I’m not much of an economist. Still, as I recently read, professional economists have successfully predicted eight out of the last three recessions, so maybe expertise is not a requirement here. And when it comes to predicting the future, no one’s crystal ball is terribly reliable. So I was just going to say “beat’s me,” but upon further reflection I think some insight can be gleaned by examining the question.

The first thing that comes to mind, how much of an attack? On the one end we could be talking about a one-off “surgical” strike designed to cripple the Iranian nuclear program. On the other end we could be talking a sustained attack against not only the nuclear program, but against other elements of the Iranian military and civil infrastructure. Since the later would almost certainly lead to a massive Iranian response and any number of anticipated and unanticipated consequences, there’s no real point trying to examine it further. Suffice it to say a major sustained US attack could easily have terrible effects on the world economy for any number of reasons.

So it’s best if we look at it from the small attack end. And there we are on safer ground speculatively. A “surgical” US strike would likely yield a certain amount of caution and uncertainty in world markets, since people would reasonably enough want to “wait and see” what the Iranian response is. And here it gets kind of interesting. The most logical Iranian response to a small US strike is…nothing. IE a small attack would make the Iranian government’s position much stronger both domestically and internationally, and they and our enemies) could easily could easily use it as more of an excuse to label the USA a “rogue nation” and further isolate us on the world stage. In fact I think it’s safe to say that a small US attack on Iran would likely have little effect on the world economy, but it would further weaken our economy.

So looking at it that way, it explains why we simply haven’t launched a “surgical strike” as the Israeli’s did against Iraq in 1983. Especially since a limited strike is unlikely to do anything more than delay the Iranian nuclear program, and give them more information about how to defend against such strikes in the future. So if the USA is going to strike Iran, it needs to be a large enough strike to cripple the Iranian nuclear program and achieve other US goals, while not being so large as to trigger a full out war. And that’s not an easy metric to figure out, which also may explain why a strike hasn’t happened yet.

Before we go on, I should point out that an Israeli strike on Iran is very unlikely. Why? Because the whole point of demonizing Iran is to draw attention away from Israel and its policies. An attack by Israel would play into the hands of extremists everywhere, and likely further weaken various regional governments like Pakistan and Egypt. This would be insane, and the fact that the jingoistic elements in Israel are practically rabid in their efforts to encourage the USA to attack Iran shows that they know this all too well.

So back to our original question, I think it can be rephrased as “What would be the effect on the world economy of a serious, sustained, but at least somewhat limited US air war on Iran?” And it’s a pretty good bet that question is being mulled by a lot of people in power the world over, both to gauge the likelihood of such and attack, and to prepare themselves for such if and when it does occur. And looking at it that way, an obvious answer to the question emerges from the smoke: Since everyone is expecting and preparing for such an attack, the effect on the world economy would likely be minimal.

The price of oil would go up, there would be some volatility in the world stock markets, some people would profit, some would lose money…but the chances of any sort of world wide economic meltdown are remote. In fact the chances of a further meltdown of the dollar and the American economy are far more likely. As Jon Carrol said (paraphrased:) “We can’t afford the two wars we are already fighting, we are going to start a third even larger war?”

Of course all bets are off if Iran decided to respond radically in kind. The Iranians have thousands of missiles, a few hundred missiles a day landing on oil facilities in the Gulf/Saudi Arabia and aimed at oil tankers in the Persian Gulf would likely cause all sorts of panic and disruption in world economies. And as Hezbollah demonstrated a couple of years back, the ability of air power to suppress missile and rocket fire is basically zero. Of course massive world wide economic disruption would hurt Iran as much as anyone, so it’s not in their interests to trigger same.

So adding it all up, it doesn’t really make sense for the US to attack Iran, but if they do, the world economy will likely respond to what the Iranians do. I still hope that no US attack occurs, but from the rhetoric, who knows. A third failed war would a be a legacy the Republicans would have a hard time living down, but Bush has shown a tendency to put good money after bad, and poker players like that are prone to pushing the deed to the farm into the pot, hoping to recoup their previous losses with one spectacular win. I live on that farm, and while I am not panicking yet, I am stocking up on food.

I hope that answered the question, feel free to debate any flaws in my logic or facts.

(The above image of an Iranian blogger is claimed as Fair Use under US copyright law. I chose it to reinforce the fact that people in Iran are just that, people like everyone else. We get so caught up in our generalizations, propaganda, and stereotypes sometimes that I think people lose sight of that. Plus the gentleman in question has a fine blog that is highly recommended reading for those who want a first person perspective on Iran.)

Written by unitedcats

December 12, 2007 at 10:54 am

Posted in Business, Iran, War, World

3 Responses

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  1. This may really sound weird but I have heard that Bush will not be allowed to engage in war with Iran, because this will result in our third world war. If Bush persists with this, information is that America will be struck by a cataclysmic natural disaster which will result in all troops returning home (before war commences) to help pick up the pieces. If you want to read more see my blog ( Like I say there, no-one hopes more than me that I’m wrong!


    December 12, 2007 at 11:09 am

  2. good blog.I like reading all your posts


    December 14, 2007 at 5:37 am

  3. world war 3


    August 8, 2010 at 11:55 am

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