The Long-Term Economic Impact of War on Global Markets
Hidden cost of war on wealth: Capital compounding may be less forgiving
Business Standard
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War impacts markets not just through immediate shocks like rising oil prices and currency volatility, but also through slower, long-term effects such as delayed earnings growth and persistent inflation. The ongoing conflict in West Asia is already affecting crude prices and financial conditions.
- 01War causes immediate market shocks, such as rising oil prices and currency volatility.
- 02The long-term effects include delayed earnings growth and persistent inflation.
- 03Financial conditions tighten, making long-term decisions less predictable.
- 04The current conflict in West Asia is disrupting oil supply routes.
- 05Higher war-risk insurance and freight costs are emerging as significant economic factors.
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War typically impacts markets through both immediate and long-term channels. While immediate effects like rising oil prices, volatile equities, and weakened currencies are easily identified, the more severe consequences manifest over time. These include delayed earnings growth, persistent inflation, and tighter financial conditions, which complicate long-term decision-making. The ongoing conflict in West Asia is contributing to these trends, as evidenced by increased crude oil prices, disruptions in the Strait of Hormuz, and rising freight costs. Additionally, higher war-risk insurance is becoming a significant factor in the global economic landscape.
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