COVID-19, commonly referred to as the coronavirus, has panicked global economic markets and precipitated a health crisis that is on the verge of going global.
What started in China in late 2019 has rapidly impacted the world economy, taken over 3,000 lives and struck fear in many citizens across the globe.
China remains the epicentre of the outbreak, but South Korea, Italy and Iran have also had to contend with swelling numbers of cases.
Iran has been particularly hard hit and has suffered the highest amount of deaths outside of China.
While the world scrambles to fight against the spread of the novel influenza strain, shocks have been felt globally, illuminating the precarity of the interconnected economy.
On February 27, the Dow Jones Industrial Average had its biggest one-day point drop and fell nearly 4.5%. It has since recovered, but with the number of cases and deaths likely to climb in the United States and across the globe, global health and the world economy are not out of the woods yet.
There have been positive signs, China has seen a decline in new cases, and as a result, they closed the first of 16 hospitals specifically constructed to fight the virus in Wuhan, the epicentre of the virus.
But the World Health Organization chief Tedros Adhanom Ghebreyesus said the world is in “uncharted territory. We have never before seen a respiratory pathogen that is capable of community transmission, but which can also be contained with the right measures.”
Iran: The Middle East Epicentre
Iran’s outbreak was identified February 19, but it has already rocked the country. Even an adviser to the Supreme Leader fell ill and died, and it has called the effectiveness of the government into question. Although there was a slow response, the Iranian government has now taken several drastic measures to curb the spread of COVID-19.
Iran shut down its parliament in what many citizens believed to be a delayed response that has fuelled public panic. Despite the measure, 8% of Iranian Parliament members were infected with the virus, and the country released an astonishing 54,000 prisoners to prevent the virus from spreading in prison populations.
“The more the officials are scared of scaring people, the more the virus will spread and the country will be further paralysed,” an Iranian doctor told the Financial Times.
Iran is also not positioned well in geopolitics to handle such an outbreak, considering heavy American economic sanctions and strained ties with regional partners.
Many countries have closed their border with Iran and restricted travel from the country, causing a large economic impact that will not be solved quickly.
While the Iranian economy looked to be rebounding after a poor 2019, early signs point to a devastating long-term impact on Iran.
“The virus outbreak will keep people from making unnecessary trips, purchases, and transactions, aggravating the downturn in the Iranian economy,” said Zahra Karimi to Bloomberg News.
Similar restrictions on air travel in the Middle East and across the globe will hurt the entire region, with economies built on air travel and oil.
Perhaps the biggest threat to multiple economies in the region is not the virus itself, but the fear it has raised in many travellers across the globe.
The International Air Transport Association (IATA) announced COVID-19 has already resulted in a $100 million loss to airlines in the Middle East.
The United Arab Emirates and other Gulf countries have cancelled all flights to Iran, and many countries have limited commercial travel to China.
Various airports across the Middle East serve as a key connection for travellers between East and West and with uncertainty in many different countries and announcements from airlines about cancelled flights, the loss could grow much larger.
Travel to Asia has been severely restricted which has had a big knock-on effect, impacting routes between countries with no virus outbreak.
Several weeks ago, the IATA released a report that projected a loss of $30 billion in revenue for the airline industry, but a spokesman told The Guardian that the projection was outdated and likely to get much higher.
OPEC has hinted at cutting output in order not to flood the market at a time of uncertainty and less demand for oil.
The outbreak may be a temporary blip for the oil and air travel market, but it does reveal the precarity of economies reliant on the industries.
While Iran remains one of the hardest-hit and the country most in need of containment, the virus has spread across the region.
Saudi Arabia, Jordan, Tunisia, and Morocco recently announced their first COVID-19 cases, and Egypt, Iraq, Kuwait, Lebanon, and Qatar said they have additional cases.
Extensive precautions have already been taken including Saudi Arabia taking the unprecedented step to forbid foreigners from going to the holy city of Mecca ahead of the annual Hajj pilgrimage.
Other major events across the Middle East have also been cancelled in fear of the spread of the virus, signalling that other industries will feel the ripple effects of cancellations.
The airline and tourism industry will be hit hard by Saudi Arabia restricting foreign travel to Mecca, and other smaller business and entertainment events will start to add up.
Countries in the Middle East have displayed a willingness to shut down events and businesses in an attempt to contain the spread of COVID-19. These precautions mixed with global economic impacts will have a large knock-on effect that could potentially damage the regional economy in the short-term.
But due to the extreme measures, other countries may be able to contain the virus better than Iran and be better positioned when the world gets a handle on the global health crisis. Regardless of the outcome, the health crisis has shined a light on many of the risks built into the global economy, some of which disproportionately impact the Middle East.