Afghanistan in the shadow of tensions: Analyzing the economic consequences of the Iran–Israel conflict on domestic prices
DOI:
10.62941/irefi.v2i2.153Downloads
Abstract
The current paper observes the direct economic impact of the Iran-Israel conflict on Afghanistan's domestic prices, a landlocked, aid-dependent, and weak economy. Even though Afghanistan has no direct connection to the conflict, it suffers immensely because of its high dependence on the Iranian trade routes and imports. The study currently evaluates inflationary pressures on key commodities like flour, rice, cooking oil, and diesel using a pre- and post-conflict analysis of the high-frequency retail prices of these commodities in Kabul. The results show that sharp price increases week on week occurred as a result of cross-border trade being disrupted, increased fuel prices, and price speculation. This inflation has also contributed to poverty, undermined the purchasing power, and highlighted such structural problems as a high unemployment rate, exchange rate variability, and an increasing trade deficit. Also, the war has resulted in the inflow of returning Afghan refugees from Iran, which has raised the pressure on the labor market and the services that are already strained. As it is demonstrated in the study, the reliance on one side in a conflict may damage the neutral, weak states such as Afghanistan. It contains evidence on indirect conflict impacts and the consequent request of trade diversification, domestic production, and regional cooperation in order to enhance resilience.
Keywords:
Afghanistan Iran-Israel conflict domestic price volatility geopolitical economic impactReferences
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