Impact of the Middle East War in the Dominican Republic

The war in the Middle East has intensified volatility in the global market, and its effects are beginning to be felt in the Dominican economy. They are mainly affecting sectors dependent on oil importation and essential raw materials.

According to economist Antonio Ciriaco Cruz, Dean of the Faculty of Economic and Social Sciences of the Autonomous University of Santo Domingo (UASD), the conflict threatens to increase costs and generate instability in the country’s supply chain of strategic products.

The strategic value of the Strait of Hormuz

Ciriaco Cruz pointed out that almost 40% of the world’s oil transits through the Strait of Hormuz, a key area in global fuel distribution. “Here we are in the presence of an area where there is an important flow of oil and other products,” said the economist in an interview for Hoy newspaper. The economist stressed that any interruption in that area could significantly increase transportation and freight costs, which in turn would raise the prices of goods and services.

Increase in oil prices

One of the main impacts on the Dominican economy is the increase in international oil prices. Ciriaco Cruz pointed out that 15 days ago, a barrel of crude oil was quoted at US$65, but now it is around US$75. According to the economist, the price is expected to continue rising.

Ciriaco warned that the barrel could rise to 100 dollars, impacting the country’s economic growth.

Possible repercussions on inflation

Another worrying factor is inflation, which could increase due to alterations in fuel and raw material” prices. “This wocompanies’ompanies’ production costs more expensive, which would inevitably be passed on to the prices of end “roducts,” he explained.

Gasoline, electricity, and raw materials, essential for domestic production, are among the sectors most vulnerable to these fluctuations.

Government measures to mitigate the impact.

The economist also highlighted the measures the Dominican government adopted to face the crisis, similar to those implemented during the conflict between Russia and Ukraine. These include freezing fuel prices, subsidizing certain raw materials, and providing monetary transfers to the most vulnerable groups through programs such as Supérate.

Contingency fund proposal

As a long-term alternative, Ciriaco suggested that the State create a contingency fund in the national budget destined for geopolitical situations that alter international markets” so that “resources could be available to cushion these situations.”