Iran war affects each sector of Dutch economy: Rabobank

The Iran war is impacting economic growth across all sectors in the Netherlands, according to Rabobank. The bank analyzed three scenarios and concluded that industries, construction, and transport could be severely affected, but the entire economy will feel the impact. Much depends on the duration of the war.

In the first scenario, the war lasts for several weeks, and the Strait of Hormuz is largely closed for only a short time. The oil price would then average $86 per barrel in March and April, although it is currently $100.

In this scenario, the expected economic growth in industries this year will fall from 2 to 1.6 percent. For construction, it would be 0.9 percent, compared to the previous estimate of slightly above 1 percent. Transport faces an even larger decline. These sectors are highly sensitive to energy prices.

In the second scenario, the Strait of Hormuz remains completely closed for a longer period, and oil prices climb to an average of $110. In the third scenario, major oil and gas deposits in the Middle East are destroyed, and the oil price rises to $150 per barrel.

In the latter scenario, growth in industries will remain 0.6 percent, growth in construction will fall to zero, and the transportation sector will shrink.

“Although the construction sector was expecting a recovery thanks to a surge in residential construction projects and major infrastructure maintenance, that recovery is now at risk of being partially halted,” said RaboResearch economist Igor Dzambo. “Material prices are rising again, especially for energy-intensive building materials such as glass, ceramics, aluminum, and synthetic products. Higher transportation costs are on top of that.”

Sectors are directly affected by higher purchasing costs, but will also face more cautious consumers. This applies to retailers, hospitality businesses, and the travel industry.

For IT companies, the impact appears limited for the time being, although they will also be affected by geopolitical uncertainty as companies postpone their investments.

Healthcare will be the least affected. “We expect growth to remain strong due to the aging population and increasing demand for care. The Jetten government’s policy plans are particularly important for this sector,” said Dzambo.