Beatty says in the article, “The short-term impact of the war was not catastrophic, as a consensus is currently emerging that this shock will be much weaker than the combined effects of supply chain disruptions and fuel and food prices resulting from the Covid-19 pandemic and the Russian invasion of Ukraine in 2022.”

He adds: “Perhaps what is most interesting is the comparison between the current Iran war and the era of the 1970s, which was characterized by high inflation rates and witnessed an oil shock in 1973. The gloomy predictions that claimed that these recent events represent a return to a state of persistent “stagflation,” accompanied by high prices and economic imbalances, have so far been proven wrong.”
The writer says that when measured based on import price inflation in emerging markets, which usually bear the brunt of global economic crises, we find that the rise in prices linked to Iran was much less than that caused by the Covid and Ukraine disruptions. It is also much weaker than in 2016, when three factors coincided: Chinese credit stimulus, a global boom in commodity prices, and a strong dollar.

Beattie points out that so far, the interruption in fertilizer supplies does not appear to have affected agricultural operations in Europe or North America, nor is this the case – most likely – for producers in the Southern Hemisphere such as Australia.

He added: “Mechanisms for storing goods and managing fertilizer supplies have proven to be flexible and effective enough to deal with the situation. Although it is still too early to know whether the temporary shortage of fertilizer supplies – resulting from the period of closure of the Strait of Hormuz – will cause serious damage, export traffic has already resumed. India, which is one of the largest importers of urea and fertilizers in the world and relies heavily on the Gulf region, appears to be doing well.”

Beatty also points out that many believe that central banks were too slow to respond to inflationary pressures during 2022, which made this crisis deeper than the crisis of the Iran war.

Beatty says, “There is no doubt that future shocks will inevitably occur, including the El Niño climate phenomenon expected to appear later this year. The Strait of Hormuz may also be on the verge of further subsequent disruptions, but in the end, the character of ‘stagflation’ is not determined by energy or other price shocks, but rather depends on how policymakers, consumers, and companies respond to those shocks.”