US - Iran Crisis: Lengthy Conflict Could Cause 'Economic, Financial Shock,' Moody’s Warns

A lengthy U.S.-Iran conflict could cause a major shock to the global economy, a senior analyst at financial services company Moody’s said Monday in a note to clients.

“A lasting conflict would have wide-ranging implications through broad economic and financial shock that significantly worsen operating and financing conditions,” Moody’s analyst Alexander Perjessy said.

He added that one “global repercussion” of the conflict could be a change in oil prices but other industries, such as tourism in Middle Eastern countries, could also be impacted.

The killing of Iranian military commander Qassim Soleimani on Thursday at Baghdad International Airport has resulted in high tensions between the U.S. and Iran. Soleimani, the leader of Iran’s Quds Force, was one of the country’s top military leaders.

The assassination comes shortly after pro-Iran protesters stormed the U.S. Embassy compound in the Iraqi capital of Baghdad last week. The Trump administration has claimed that the strike was necessary to thwart an “imminent attack” but Democrats have questioned the legality and timing of the operation.

Iran has responded by saying that it would abandon all of its commitments under the 2015 Iran nuclear deal and has threatened “harsh retaliation” against the United States.

Trump has said that the U.S. would target 52 Iranian sites if Tehran conducts an attack against American citizens or U.S.-controlled assets. Trump said that the U.S. would even target Iranian cultural sites, a threat criticized by some Democrats.

U.S.-Iran relations were already in a fragile state in 2019, with the U.S. blaming Iran for an attack on Saudi Aramco facilities in September. In June, a U.S. drone was shot down by the Iranian Revolutionary Guard Corps (IGRC), with Tehran saying that the drone was violating Iranian airspace.

Trump had planned to launch a U.S. airstrike on Iranian territory in retaliation for the downed drone but he pulled back when hearing that such a strike would cause 150 Iranian casualties. Trump felt that such a move would not be “proportionate” to Iran’s actions.

Trump announced in May 2018 that the U.S. would pull out of the Iran nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA). Since then, the Trump administration has ratcheted up sanctions against Iran, weakening the Iranian economy. International leaders, such as French President Emmanuel Macron, have tried to persuade Trump to renegotiate the deal with Iran.