Capital Economics note on the likely impact (this in summary):
- the major concern for the world economy is that events spiral out of control and the US launches a full-blown military assault on Iran
- the resulting collapse in Iran's economy could knock as much as 0.3%-pts off global GDP - equal to our estimate of the damage from the US-China trade war
- oil prices would surge. … This would push up inflation across the world - by as much as 3.5-4.0%-pts in the OECD countries … Central banks in the developed world would probably look through this.
- there would also be indirect effects via a hit to sentiment and possible disruption to shipping routes
- equity and bond markets across the Middle East would probably come under pressure … we suspect that dollar pegs in the Gulf would remain intact
- At a global level, a dent to risk appetite would cause risky assets to suffer - equities would fall and EM currencies would weaken - and safe haven assets to rally.
