AYESHA RASCOE, HOST:
The U.S.-Israel war on Iran is now in its fourth week, and reverberations are being felt all over the world. Gas prices have jumped in the U.S. And many countries in Asia, Africa and Europe are also facing higher fuel prices, plus supply chain shortages and disruptions in key trade routes. During her White House visit last week, Japan's prime minister, Sanae Takaichi, summed it up this way.
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PRIME MINISTER SANAE TAKAICHI: (Through interpreter) Our global economy is now about to experience a huge hit because of this development.
RASCOE: Martin Wolf is chief economic commentator for the Financial Times, and he joins me now from London. Welcome to the program.
MARTIN WOLF: It's a pleasure to be with you.
RASCOE: So let's follow up on the Japanese - on what the Japanese prime minister said. What big hit will this war have on the global economy?
WOLF: Well, there are sort of two answers to that. One we don't know yet because it depends on how long the war goes on and how big the ramifications are after the war, how much damage there's been done to oil production facilities and so forth. And, of course, also whether people will feel confident enough, even though the war is supposedly over, that it's actually over. If it's over quickly, it's still a big - a problem. But if it goes on for a - let's say, another year - who knows? - then of course, it's a - potentially a catastrophe. And then...
RASCOE: But...
WOLF: ...That leads you to how big the catastrophe would be. Well, again, it depends on the answer to...
RASCOE: But...
WOLF: ...Those...
RASCOE: But...
WOLF: ...Questions.
RASCOE: But what...
WOLF: But it could be anything from something fairly small...
RASCOE: Yes.
WOLF: ...Manageable, or probably the biggest...
RASCOE: But based on what...
WOLF: ...Horror shock (ph) we've had.
RASCOE: Based on what we've seen so far with, like, the shutdown of the Strait of Hormuz and how that's affecting, you know, the movement of oil and, you know, supply chains, like, do you see an inflation risk right now just based on what's happening right now?
WOLF: There's certainly some inflation risk right now, no question, just on what's happened already.
RASCOE: And what do you think could be the ramifications if this does go on for, say, you know, just maybe a couple more weeks - you know, if this remains, if these disruptions remain?
WOLF: If these disruptions remain for a couple more weeks, it'd be a bit worse than they are now, but it's still something we can look through. The world economy will probably recover reasonably quickly as long as there's not long-lasting damage.
RASCOE: OK. Well, we are - we're starting to see some currency crises percolate because of the war. India's rupee has depreciated, as well as Thailand's baht and the Philippines' peso. South Korea is preparing for a potential currency crisis. It seems like countries in Asia are particularly vulnerable right now. Is that the case?
WOLF: Yes. The Asian countries are most dependent - Europe to some extent, too - but the Asian countries are the most dependent of the big economies, the advanced economies on oil and gas from the Gulf region. So, yes, they are particularly vulnerable, and India is very much one of them. Also China.
RASCOE: Well, what measures do you see these countries around the world taking to kind of try to prop up their economies as the war continues?
WOLF: Well, they will certainly do their best, and China is clearly working quite hard to get oil and gas out somehow. That, for some of them, maybe with China, will happen. And - but otherwise, they just have to bear it. They have to ration, probably. They have to affect - accept the higher prices. They're going to be worse off. Everybody's going to be worse off, but they're going to be particularly worse off.
RASCOE: What's the worst-case scenario right now for the global economy?
WOLF: Well, again, it depends on how long it goes on for. The worst case is that this will be one of the biggest shocks in the postwar period. If it goes on for a year or two, it's a huge shock.
RASCOE: That's Martin Wolf, chief economics commentator for the Financial Times. Thank you so much for speaking with us today.
WOLF: It's a pleasure. Transcript provided by NPR, Copyright NPR.
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