Question

how does US relationship with Iran affect worlds economy?

Answer 1

Iran offers India oil at credit of around here months. It also accepts rupee( Indian currency) . Other oil exporting countries accept dollars. USA is against this and hence India has to find new oil partners. India is among top four countries in Purchasing power parity comparisons. This is just an example how USA- Iran conflict can change trade terms for other countries.

Iran is world's fourth largest oil supplier and holds 10% of proven oil reserves. In Organization of petroleum exporting countries(OPEC), it is second largest oil exporter. Oil is considered to be inelastic in demand and hence oil price increase will make importing countries pay more and current account will have deficit. As more dollars are demanded, local currencies will depreciate. This again impacts importing countries negatively.

Oil prices went up by 10 % already. Unsure economic situations will impact aggregate demand negatively and global GDP growth rates will come down. Share markets are already affected where stock market indices came down flushing a good amount of money out.