Give Peace A Chance Or Suffer Further Economic Consequences Of A Prolonged War

By Mohd Faiz Abdullah

KUALA LUMPUR, April 12 (Bernama) -- The latest two-week ceasefire between the United States (US) and Iran, agreed on the evening of April 7, presents a moment of restraint and a huge sigh of relief.

At the time of writing, negotiations have proceeded for 14 continuous hours at the highest level in Islamabad, with Speaker of Iran’s Parliament Mohammad Ghalibaf leading the Iranian delegation, and Vice President J.D. Vance leading the US side. 

These talks are progressing even as missiles are firing asunder, thanks to renewed incessant Israeli bombardments on Lebanon and swift counterattacks by Hezbollah. It’s a circle within a spiral in that vicious wheel of violence, but as Prime Minister Datuk Seri Anwar Ibrahim has reminded participants of the recent Kuala Lumpur-Ankara Dialogue, giving peace a chance is not a mere mantra, nor can peace be handed on a platter: “It must be built, deliberately and patiently, with resolve, with courage, and with an unwavering commitment to justice and human dignity.”

So, let’s examine the peace moves. The truce struck on April 7 reportedly drew on elements of a ten-point proposal advanced by Iran, although the details remain partial and not formally articulated. Experience, however, counsels caution. Ceasefires of this nature have, on many occasions, served less as pathways to resolution than as brief interludes in a longer cycle of contestation. 

Publicly available reporting points to a fragile arrangement. The full terms of the US proposal have not been released, and comparisons of the two sides’ positions rely on partial disclosures and diplomatic briefings. Still, even these snapshots are revealing. 

Over the noise of broadcast analysts and reporters giving blow-by-blow accounts, a comparison compiled by the Council on Foreign Relations highlights the scale of divergence. Iran is reported to insist on sovereign control over the Strait of Hormuz, the preservation of its nuclear programme in some form, and the lifting of sanctions. The US, by contrast, is pushing for the reopening of the strait, constraints on Iran’s nuclear activities, limits on its military capabilities, and an end to support for regional proxies.

These are not minor differences of sequencing or emphasis but enormous divergences which make for seemingly insurmountable barriers on the path to a negotiating resolution. 

Complicating matters further is the broader regional theatre. As stated at the outset, Israeli aggression in Lebanon has continued unabated, placing the ceasefire under severe strain. The latest buzz suggests some possibility of ceasefire talks to be conducted in the US, only to be summarily dismissed by the Israelis.

This only serves to reinforce Washington’s evident inability, or unwillingness, to meaningfully restrain Israel’s military operations, raising questions about both its leverage and intent. Taken together, these developments underscore a central reality: the conflict cannot be neatly 2 contained within a bilateral frame. Its dynamics are inherently regional, and its stabilisation depends on factors beyond Washington and Tehran alone.

While negotiations between Iran and the US are reported to be moving in the right trajectory, the prudent working assumption is not that the conflict will end quickly, but that the ceasefire remains fragile. If so, the more consequential story lies not only in the conduct of the war, but in its widening economic, social and environmental effects.

The Strait of Hormuz remains one of the world’s most critical chokepoints, accounting for roughly 20 per cent of global petroleum liquids passing through it each day. Heightened risks have already introduced volatility into global markets, with oil prices responding to both actual supply concerns and expectations of interruption.

Beyond oil, around one-fifth of global LNG trade also transits the strait, linking developments in the Gulf directly to electricity generation and industrial output across Asia and beyond. For energy-importing economies, particularly in Asia, these dynamics spell higher input costs and increased vulnerability to external shocks. 

The effects are not confined to energy markets but translate into inflationary pressures across the broader economy, particularly arising from repercussions on supply chains. Rising fuel costs feed directly into transportation and logistics, increasing the cost of moving goods across borders and within domestic markets. Production and manufacturing costs, too, begin to rise, particularly in energy-intensive industries.

The conflict is increasing food insecurity risks, especially for import-dependent economies, as the increased cost of fertilisers raises the cost of crop production. Livestock systems are also impacted, where rising prices of animal feed pile on the cost of meat and poultry. The implication is clear: cost pressures originating in energy markets do not remain contained, but are transmitted progressively through agricultural, livestock and food systems.

For developing economies, where food and fuel constitute a significant share of household expenditure, the impact is particularly acute. What might appear as a marginal increase at the global level can bite into the purchasing power of households, with wider social and fiscal implications. Additionally, for lower-income households, this could constrain access to meat-based protein sources, further compounding the nutritional impact of rising food prices. 

Governments, in turn, may come under pressure to cushion these effects, including through subsidies or other fiscal measures, even as many face already constrained fiscal space. What begins as a geopolitical shock thus becomes a domestic policy challenge, forcing difficult trade-offs between fiscal sustainability and social protection.

There are deeper structural consequences as well. Labour markets across parts of West Asia are already under strain from instability and displacement. Prolonged conflict can exacerbate these pressures, discouraging investment, accelerating outward migration, and delaying reconstruction. Over time, these risks entrench a cycle in which economic fragility and insecurity reinforce one another.

The human cost is equally significant, if not more so. Conflict disrupts access to education, healthcare and livelihoods, while generating displacement at scale. Estimates from the UNHCR suggest that millions have already been displaced in the course of the current war. The long-term consequence is an erosion of human capital that extends well beyond the duration of the conflict itself.

The psychological dimension is no less consequential, as exposure to conflict, displacement and insecurity is associated with elevated risks of anxiety, depression and post-traumatic stress. Environmental pressures are similarly amplified, particularly in relation to climate concerns, as energy insecurity impedes the transition to cleaner energy while diverting political attention and financial resources away from climate mitigation and adaptation efforts.

Taken together, these dynamics point to a broader conclusion. The costs of the conflict are not confined to the battlefield, nor are they limited to the immediate parties involved. They are diffuse, cumulative and global.

For small trading nations such as Malaysia and similar economies, this presents a particular challenge. Being deeply integrated into global trade and energy systems, these economies nevertheless have limited influence over the trajectory of major power conflicts. They are, in effect, exposed to the consequences without shaping the causes.

This asymmetry underscores the importance of resilience. This is not a mere situational crisis but one with deep implications. Diversifying energy sources, strengthening food security frameworks, enhancing supply chain robustness, and maintaining fiscal discipline become not just economic priorities but strategic imperatives. 

In this vein, warning that a prolonged conflict will warrant a holistic review of the nation’s growth projections and major undertakings, Prime Minister Anwar has initiated a host of high-level measures to deal with the crisis. Needless to say, the ultimate responses cannot be merely ad hoc-driven but must be strategically calculated for the long haul. 

At the same time, the role of diplomacy cannot be overstated. Far from being merely normative, advocacy for de-escalation is grounded in economic self-interest. The longer the conflict persists, the more entrenched its effects become, and the more difficult they are to reverse.

In this context, the insistence on absolute diplomatic positions risks obscuring the realities of conflict resolution. Declaring that one will not negotiate with ‘terrorists’ may offer rhetorical appeal, but it does little to resolve the conflict itself. The ascription itself is often contested, shaped as much by political leanings as by objective criteria.

Pontificating from a purported moral high ground has its inherent hazards, and we would do well to heed the exhortation against being the first to cast the stone. Long story short, durable outcomes are seldom achieved without some degree of engagement, however constrained. 

As I pen the concluding lines, the negotiations have taken a breather. While current indications suggest that the underlying differences remain substantial and that the path to resolution is clouded in uncertainty, the optimist in me remains hopeful that the recent ceasefire may yet hold, and that negotiations, even if not entirely fruitful, may still narrow the chasm between the parties. 

“Give peace a chance” is not merely a slogan from that legendary John Lennon anti-war anthem, but a collective effort with the conviction that “we will work it out” to take us on the path of peace, stability, and a sustainable future. 

--BERNAMA

*Datuk Prof Dr Mohd Faiz Abdullah is the Executive Chairman of ISIS Malaysia