While the direct effect of renewed strikes on shipping in the Red Sea on aggregate world trade is likely to be limited, the impact on Asian economies that rely more heavily on oil imports from Saudi Arabia would be more significant. Pakistan, the Philippines and Japan are particularly vulnerable. The bigger threat to the global economy would be via higher oil prices. An effective closure of the Bab el-Mandeb Strait would push us closer to our “adverse” macro scenario for the war, in which the slowdown in global GDP growth is sufficient to meet most definitions of a global recession.
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